Whirlpool Aktie

Good morning, and welcome to Whirlpool Corporation's Third Quarter 2026 Earnings Call. Today's call is being recorded. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer; Roxanne Warner, our Chief Financial Officer; Juan Carlos Puente, our Executive President of North America and Global Strategic Sourcing and Ludovic Beaufils, our Executive President of KitchenAid Small Appliances in Latin America.

Our remarks today track with the presentation available on the Investors section of our website at whirlpoolcorp.com. Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements to assist you in better understanding -- more Corporate's future expectations. Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K, 10-Q and other periodic reports. We also want to remind you that today's presentation includes non-GAAP measures outlined in further detail at the beginning of our earnings presentation.

We believe these measures are important indicators of our operations as they exclude items that may not be indicative of results from our ongoing business operations. We also think the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operations. Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for the reconciliation of non-GAAP items to the most directly comparable GAAP measures.

[Operator Instructions] Following our prepared remarks, the call will be open for analyst questions. [Operator Instructions] With that, I'll turn the call over to Marc.

Thanks, Liz, and good morning, everyone. During the quarter, our execution focused on 2 core imperatives: protecting and expanding our margins in a tough macro environment and disciplined cash management. These imperatives not only shaped our third quarter results, but are also driving our actions as we move towards the end of 2026 and into 2027.

What you will hear today are essentially 4 key messages: First, we delivered another quarter of sequential margin improvement against macroeconomic challenges that undoubtedly intensified over the last 3 months. Second, we made good progress on our pricing actions, in particular in North America. This progress was partially offset by incremental inflationary costs. And as a result, we did not deliver the margin step-up we had expected. In line with a slower pace of margin recovery in the third quarter, we are updating our full year margin guidance.

Third, we have implemented further pricing actions of 7% to 10% in North America and in Latin America. We expect the impact of these new actions to be somewhat limited in Q4 and fully ramping up in January. Our structural cost initiatives around strategic sourcing, manufacturing optimization and warehouse footprint consolidation are on track. But as mentioned in prior calls, the majority of the cost benefits will impact 2027. These structural cost initiatives together with the additional pricing actions set up a strong foundation for margin expansion in 2020.

And fourth, we are prioritizing highly disciplined working capital management that positions us to deliver on our full year free cash flow goal. Turning to Slide 7. Let me cover our third quarter results. We delivered net sales of $3.7 billion, which was impacted by softer industry demand in North America. We saw a sequential margin improvement of 80 basis points to 2.6% and resulting in ongoing earnings per share of negative $0.21.

While we made progress on our pricing and cost takeout actions, this progress was partially offset by higher raw material, fuel and logistic costs. During the quarter, we maintained strict working capital discipline to prioritize balance sheet strength. Our free cash flow was a consumption of approximately $1.1 billion which was negatively impacted by the timing of our recovery of insurance claims related to Grupo Casas Bahia. This is a major retailer in Brazil, which filed for bankruptcy reorganization the equivalent of Chapter 11 in the U.S. in August.

We expect to receive a majority of insurance claim payments related to Vizient in the fourth quarter. Turning to Slide 8, I will walk through our sequential ongoing EBIT margin drivers. We delivered sequential margin improvement of approximately 80 basis points. Our pricing actions in North America and Latin America fully offset the mix headwinds across the business and result in 250 basis points of improvement. Net cost was a tailwind of 100 basis points as we continue to make progress on structural cost takeout and ongoing cost productivity with the benefits being partially offset by the impact of fuel and logistic costs. Raw material inflation unfavorably impacted margin by 75 basis points, primarily driven by higher steel, resin and base metal costs.

Net tariff impact was an unfavorable 225 basis points driven by incremental Section 232 tariffs in the U.S. Marketing and Technology investments increased by 25 basis points, offset by a favorable currency impact of 25 basis points, primarily from a Mexican peso and Brazilian real and favorable transaction impacts of a [ probaly ] 25 basis points. Now I will turn the call over to Juan Carlos to review our MDA North America results.

Thanks, Marc. Turning to Slide 10, I will provide an overview of our MDA North America segment. In the third quarter, net sales were $2.5 billion, negatively impacted by the persistence of industry demand. In Q3, the industry was down 3.3% and which is in line with our full year guidance of down approximately 5%. The solid execution of our price increase implemented in April and July combined with our new product launches, drove approximately 230 basis points of sequential margin expansion. This improvement was masked by the inflationary headwinds resulted in 30 basis points of net sequential EBIT margin benefit.

More recently, we announced an additional 7% price increase effective November 1 in Canada and December in the U.S. while the impact of Q4 results will be limited, we expect this action, combined with our structural cost takeout actions to further expand margins in 2027. Turning to Slide 11, let's review the positive impact of this price increase in our retail sellout price data. As a reminder, this chart represents the aggregated view of thousands of price data point collected every week from public sources. The yellow line shows that our price realization progressed strongly through Q3, maintaining 8% to 9% gains over the January 2025 baseline prices.

The blue line shows that competitors' average pricing has also meaningfully moved upwards since the beginning of 2026. This trend is consistent with the full burden of tariffs and increased transportation costs. Ultimately reinforcing our confidence in the long-term value of our domestic footprint. Another element that is centered to our strategy is delivering meaningful product innovation that delights our consumers.

Turning to Slide 12. You can see our latest industry first product induction in our refrigeration lineup. We recently launched the industry-first refrigerator with an indoor [ novatized ] maker under the Whirlpool brand. This true counter debt French store refrigerator is a great addition to our portfolio. It hits the marketplace as the consumer demand for logged ice accelerates across North America, setting a new benchmark for consumer innovation. By combining highly valued features with premium design, this product serves as a standout differentiator that directly supports our premium growth strategy. Turning to Slide 13.

We're bringing another industry-first innovation to our core laundry category. Our Table washer now features a removable delicate basket which addresses a long-standing consumer pain point by allowing delicate items to be gently washed at the same time as the everyday laundry load by combining delicate care with daily laundry capacity in a single cycle. This unique offering drives premium mix and reinforces our product leadership in MDA North America.

On Slide 13, we're maximizing benefits from our manufacturing and supply chain footprint to optimize our structural competitive advantage. In our last earnings call, we discussed 3 key manufacturing footprint initiatives that we announced in Q1. A multiyear modernization and operational optimization of our plant in Amana, Iowa, unlocking supply chain efficiencies through vertical integration in our facility in Perrysburg, Ohio and shifting refrigeration production between Supsa and Ramos, Mexico to leverage scale and lower conversion costs.

We have hit key milestones across all 3 initiatives, and our progress year-to-date gives us confidence in our operational trajectory. In U.S. logistics, we have completed 25% reduction in our local distribution center count and continue to advance with the consolidation of regional distributions and return centers. Importantly, we are maintaining reach and proximity with 97% of our customers remaining within 100 miles of our distribution centers. In total, these manufacturing supply chain actions represent $290 million in structural cost benefits. While these benefits are largely expected into 2027, our cost initiatives continue to progress contributing to our sequential margin progress and offsetting incremental fuel logistics costs.

Now I'll turn the call over to Ludo to review our MDA Latin America and SDA global results.

Thanks, Juan Carlos. Turning to Slide 15, I'll review the results for our MDA Latin America business. Excluding currency, net sales increased 2.5%, driven by higher volume, partially offset by price/mix. We experienced temporary margin pressure as our mix shifted out of Grupo Casas Bahia more premium portfolio, resulting in an EBIT margin of 2%. As retail inventories adjust and our volume redistribution settles, we expect the mix to normalize over time. We have announced incremental price increases across the segment of up to 10%, effective in Q4, and which, alongside our key new product launches are expected to increase profitability in 2027.

Turning to Slide 16, you can see 2 key product launches that are driving premium growth in MDA Latin America. First, a new lineup of induction cooktops in Brazil, featuring a fresh design that aligns with the premium breast amp aesthetic. Second, the new Whirlpool and Brastemp French store refrigeration line, with its stunning Black liner combining sophisticated design reversal functionality.

These are just 2 examples of how we're expanding our premium product pipeline in Latin America with high-margin products as we continue to focus on margin expansion.

Turning to Slide 17. Let's review our SDA global business. New product launches in our direct-to-consumer channel continued to support share gains globally and helped deliver a healthy EBIT margin of 18.6% in the third quarter. We had another quarter of strong sellout globally, while seasonal order shifts pushed the top line growth into Q4 as evidenced by the approximately 40% increase year-over-year in our October U.S. orders.

We continue to take actions to grow our business beyond our core categories and have recently bolstered our portfolio of licensed products by expanding our kitchen accessory sales through our direct-to-consumer channel. We are also introducing Kitchenette Kids, a new line of Royal play toys with light sounds and motion to captivate aspiring young shafts. Kitchenatoys can already be found in key retailers globally.

On Slide 18, let me showcase 2 of our newest product innovations. On the left is our KitchenAid 2026 design CRE stand mixer, the luminaire. It combines the built in light of our new Artisan Plus with the new fluid glass ball and the result is a striking new visual expression for this iconic kitchen appliance. The luminaire complements our successful Artisans+ lineup, which has generated strong interest from trade customers and enabled us to capture high-value incremental flooring and a high-mix POS. On the right, we're highlighting the expansion of our kitchenAid Gold cordless line. We've added a greater slicer shredder and a vacuum sealer, which means a single rechargeable battery can now power 10 different appliances across the kitchenAid gold collection.

To summarize, we've had a strong performance in the first 3 quarters and now enter Q4 highly confident in our ability to deliver double-digit growth for the year at highly accretive margins, in line with our full year guidance. Let me now turn the call over to Roxanne to review our updated guidance and capital allocation priorities.

Thanks, Ludo. Turning to Slide 20. We are updating our full year guidance across organic net sales, ongoing EBIT and ongoing EBIT margin to reflect the current piece of our margin recovery. On a like-for-like basis, we now expect revenue decline of approximately 1.5% in 2026. This reflects softer demand in the U.S. along with price and mix pressures, particularly in Latin America. We anticipate our full year ongoing EBIT margin between 2% and 2.2% driven by continued momentum from our new product launches, strategic pricing and sustained structural cost deco.

We are being extremely aggressive around what we can control. On a full year basis, we expect to deliver approximately $250 million of gross cost savings driven by design to value cost reductions and strategic cost initiatives. These positive drivers are being offset by the negative impact of volume deleveraging tied to softer demand and fuel and logistics costs resulting in net cost takeout below $150 million.

Despite these external headwinds, our cash generation is resilient. We expect to deliver free cash flow of approximately $300 million or approximately 2% of net sales driven by a rigorous working capital discipline, including proactive inventory reductions and stronger cash collection. Turning to Slide 21. Let me walk you through our updated EBIT margin guidance for the year. We are now expecting a benefit of 25 basis points in 2026 from price mix with the benefits of our multiple pricing actions [ expanding ] into 2027. We expect a 125 basis point headwind from our cost actions being more than offset by inflation and volume deleverage.

We now expect a 100 basis point headwind from raw material inflation, driven by elevated resin and base metal costs. We expect a lowered 75 basis point headwind from the impact of tariffs, net of tariff mitigation actions. It is important to note that these impacts represent currently announced tariffs and do not factor in any future or potential changes in trade policy. We also now expect no material impact from marketing and technology and a favorable currency impact of 25 basis points driven by the Mexican peso and Brazilian real.

Turning to Slide 22. I will review our updated segment guidance. Starting with industry demand, we now expect MDA Latin America to increase 5% to 7% with our expectations for MDA North America and FDA Global unchanged. For MDN North America, we now expect to deliver a full year EBIT margin of more than 2%. For MDA Latin America, we now expect to deliver a full year EBIT margin of approximately 3%. Our full year EBIT margin expectations for our FDA global business remain unchanged.

Turning to Slide 23. I will outline the components of our free cash flow guidance. As I mentioned, we expect to deliver approximately $300 million in free cash flow in 2026. We expect our lower earnings contribution to be fully offset by robust working capital management, including stronger cash collection and inventory optimization, which are expected to protect our cash flow generation and maintain our balance sheet resilience to navigate challenging market conditions.

Turning to Slide 24. Let me reiterate our capital allocation priorities. Investing in organic growth through product innovation is critical to our business. We will continue to invest in product innovation, digital transformation and cost efficiency projects with approximately $400 million of CapEx expected this year.

Turning to our balance sheet and capital allocation. We are very pleased with the proactive steps we've taken to secure long-term financial flexibility in what remains a challenging operating environment. As part of our commitment to optimizing our portfolio, we fully exited our stake in [ Veco ] Europe during the second quarter. In tandem, our strategic capital structure actions have successfully extended our debt maturity profile leaving us with no major maturities until 2028.

Furthermore, we are raising our year-end net debt outlook. We now expect to close the year below $4.5 billion, improving on our prior target of net debt of less than $5 billion. Now I will turn the call back over to Marc for closing remarks.

Thanks, Roxanne. Turning to Slide 25. Let me wrap up before we take questions. Despite the persistent macroeconomic headwinds, we are focused on what we can control, driving margin expansion through pricing realization and disciplined execution of our structural cost takeout actions are front and center. Our rigorous working capital management is protecting our free cash flow, reinforcing our balance sheet and maintaining our financial flexibility. Beyond our core major appliances, our business units continue to deliver exceptional value.

[ Incinerator ] delivered its second consecutive quarter of year-over-year revenue growth and SDA Global is on track to deliver a very strong performance in 2026. As we look forward to 2027, we are cautiously optimistic. A combination of, one, a very strong pipeline of new product launches; two, the benefits from the pricing actions we have already taken and announced; and three, the structural cost reduction initiatives that are fully underway together create a solid foundation for margin expansion.

And this is absent of a change in the macro environment. Most importantly, we are fully committed to creating shareholder value. Strategic investments in our U.S. domestic manufacturing footprint are deepening our competitive advantage and our portfolio of iconic brands and leading position in the builder channel will capitalize the tailwinds from eventual U.S. housing market recovery.

Now we will end our formal remarks and open it up for questions.

[Operator Instructions] Your first question comes from the line of Sam Darkatsh from Raymond James.

Yes. Marc, Roxane, Juan Carlos, Ludo. How are you First question, a lot of moving parts. We're starting to get a little bit more visibility into 2027. As it stands right now, I mean, I know things are fluid. But as it stands right now, what is RMI and tariff and cost takeouts look like for 2027? And then I've got a quick follow-up.

Yes. So Sam, I mean, obviously, as you know, it's -- we give guidance and everything else in more detail in our January call. Having said that, let me give you a little bit of perspective and as you may have heard in my remarks earlier, we're cautiously optimistic for 2027.

Now on the cost side, specifically. And again, these are, call it, the external cost elements and the internal ones. Let me first start with the internal ones. What we call our gross productivity from design changes, et cetera, is actually also is a pretty well on track. You also need to understand that -- and you know it is these are massive engineering efforts, which very often have a quite a bit of sizable carryover benefit. So we know pretty much today what we will get next year from these cost changes and they're on track.

The second part is what we earlier highlighted is the structural cost changes with what we've been doing in the [ manner, ] what we're doing in [ super, ] what we're doing in Brazil also between Argentina and Brazil and lastly, [ Perisur. ] These are all massive structural cost changes, frankly, which cost us money this year, so they didn't give us that much benefit this year, but they will carry over. So we feel very good about, call it, the cost which we can control. And I would argue, from today's perspective, we're probably heading towards 1 of the highest gross productivity numbers in a number of years.

The flip side is, as you point out, RMI and tariff. The tariff. I mean, we all know that we don't know. Right now, we're assuming it's pretty -- a more stable tariff environment. Obviously, there's a little bit of uncertainty on the Canadian tariff. That's probably the only one. But right now, factor-in just staying, hopefully, at one point will go away. But again, we just don't know right now, we just assume it's stable.

On the raw material. As you know, the 2 biggest raw materials to have is steel and resins. Steel is in particular for North America has seen a massive price increase over the last 12 months, actually of 50%, which I think in many ways, you could argue it's a little bit disconnected from reality because iron ore went down and the international steel prices are on a completely different level. Having said that, we locked in 2 out of 3 contracts, which are long-term contracts. And I would call them at fair prices, not spectacular, but they're fair. So to some extent, we have a certain buffer and we have a certain protection not yet entirely.

But it's going to be a hit versus the full year run rate. Having said that, that is largely baked in already in the back half of this year. So sequentially, it's not that much of a dramatic change. And then you have a plastic side of a resin side, which in the long term, typically follows oil as you've all seen, all just in Q3 went up 20% for the reasons which we're all aware of. And right now, the only thing which we can do right now, if oil stays, let's say, around $100, yes, that would largely be reflected with our run rate of Q3 and Q4.

But we all know there is a certain, call it, volatility risk, which by the way, could go in both ways on the oil side heading into 2027. So on raw material, I think oil is right now the biggest factor, which we can't fully foresee, steel, a little bit better because we have these contracts. And then, of course, you have a large tail end on raw materials, which for entire '26 were not necessarily favorable. But I would say largely reflected in the Q3 and Q4 run rate.

Sam it was a long answer to a short question, but I just want to give you a little bit of color.

The second question, the 7% North American pricing effective in December. I'm guessing that's mostly PMAP, but is that PMAP, is that list? And then what is the 2027 price rollover at this point, understanding that almost everything is really to 27%, not to 4Q?

Sam, let me start and maybe I will ask Juan Carlos to give some additional color. And then let me combine your question, which probably like the question, which we might get on Page 11 anyhow on the price development, which Again, this chart on price 11 shows pretty much with price development since January 25, us versus a competitor. You clearly saw in Q3, we were June, July, we were aiming very high.

We had to course correct a little bit in Q3. And right now, we're kind of call it boosting another price element in Q4 and that's what's already been announced to the trade. Obviously, we trade is fully aware of what we're doing, which, in reality, there are some, call it, more smaller tactical moves throughout October, November and then there's a significant move effective kind of first week or end of the first week in December, which fully carries over into next year.

That significant move, which again is a ballpark of 7% is actually a combination of MAP, PMAP in some cases, also first cost. So it's a mixed bag of elements, but it's largely on the map where we also gave -- and the [ Mather ] we gave trade visibility for quite some months out. So it's not just a kind of a 1 week, it's a fairly predictable one. Again, that has already been communicated to the trade, but it's a combination of different tools. Juan Carlos?

Yes. So obviously, the focus is in the U.S. In the U.S. it's 7% starting December 3, and in Canada is November 1. But it is -- basically, we provide to our trade partners 90-day lead time on all the promotional pricing moving forward, and that's what has been communicated with the trade..

Just the last comment I want to make, Sam, on your carryover question. Needless to say when you kind of with the price increases and knowing that this is a holiday quarter, you can't impact that much anymore of Black Friday in the promotion period would cause correct a little bit, but you can't impact it. So yes, there in the month of December, we expect a sizable lift, and that's already baked in.

And of course, that lift will carry over into next year. That's part of the reason why we're cautiously optimistic. Again, this is a competitive environment. But this is what we communicated. And obviously, exit run rates, we have, I would say, several points of positive pricing carrying into '27.

Your next question comes from the line of David MacGregor from Longbow Research..

I wanted to ask you about the fourth quarter free cash flow that's implied in your $300 million for the year. And specifically around working capital because you talked about reducing inventories, increasing collections. Maybe you can provide some examples of exactly what is your plan to do differently there that gives you confidence in that number? And then also, you've got your Casas Bahia recovery coming through in 4Q and how much of that, should we be more...

So David, let me maybe give you a high level, and then I would ask Roxane to give you a little bit more color and details. So first of all, as you know, I mean, in Q4, that's typically the quarter where our cash flow flips from negative or low to positive. So that's not unusual for typical seasonality. Q3 is -- and on time give a little bit more color, is heavily impact because, of course, we had to receivable from Casas Bahia are out negative in Q3, of which we collect a big portion back into Q4.

If you look at our full year cash flow guidance in the bridge, of course, we're kind of softer on the earnings side, and we basically make it up on the working capital. You also saw on the working capital initially, so it's now showing $300 million. If you compare it to last year, last year, we consumed working capital of $150 million. So the first $150 million is basically just to flip back to normal working capital. But yes, we challenge ourselves with an additional $150 million of working capital, which requires work, and the first 1 to admit it.

The reason why we're positive about it is our inventories, which is typically the most difficult piece to kind of adjust in the short term are on a very low level. I would even argue, to some extent, too low level, so typically, when you have a lot of work in Q4 to take it down, we're already at that level. So we know that's on a pretty good level. In fact, we may even produce more, which gives us a little bit of a boost on the payable side.

So -- but yes, we're collecting. We challenge ourselves with an additional $150 million working capital beyond what we had in mind to offset the earnings shortfall. And right now, we have plans in place to go after that Okay?

So just to put some numbers, particularly on the Casas Bahia portion. In Q3, there's approximately $150 million of the receivable that we wear and that has an impact on the Q3 free cash flow. Our expectation is to then collect approximately $100 million of that in Q4. So you see that timing shift -- and then as Mark said, to be very specific, we came into this year saying that we're going to go after working capital with everything we have, and that's exactly what we did. We did in the first half, execute the inventory actions precisely as we mentioned in the call that we would do. And then now in the Q4, we're very, very focused on cash collections, reducing over the use to levels that we haven't had before. And then similarly, on accounts payable, working very closely with our suppliers to get those terms that we need to ensure that we deliver the working capital of approximately $300 million for the year..

Okay. Second question, I guess I just wanted, Mark, to get your impression on replacement demand. And I think we can all track what's going on in the builder channel and discretionary. But the replacement demand we've always thought of as being kind of the rock, right? That was the 55%, 60% of demand that we knew we could count on, it seems as though that's easing up a little bit. People are maybe finding it a little easier on the household cash flow to repair rather than replace. What are you seeing in the numbers right now when you look at replacement demand? And how are you thinking about that.

Yes. So David, I would say there's a long-term perspective on replacement and kind of more temporary one. First of all, the long-term one is reality is we're living right now in the replacement market. You also -- you know as well as anybody else at the minus 5% of manless which we're forecasting is largely coming off discretionary. It's -- that's essentially what -- that's a painful part because of discretionary, as you all know, is the more margin-rich and mix rich part of our business. So replacement is right now a dominant factor now come to a temporary one, which you probably alluded to, we've seen in situations in the past where you had a very negative consumer confidence or elements that people even hold back some replacement decisions.

For example, on dishwashers, or on a second appliance. So we've seen this kind of situation before what people living in a replacement market, which with our supply chain, et cetera, we're well set up to deal with it. But right now, it doesn't help you on the mix side.

Your next question comes from the line of Mike Dahl from RBC Capital Markets.

Just wanted to start out on the price increase in North America. I mean, Marc, you mentioned you're having a course correct a little in 3Q. And when you think about the additional price actions, it doesn't seem like, at least at this point, your competitors didn't follow on the summer increases, and I don't believe they've announced similar ones, the way you have incrementally.

So is this going to represent kind of a shift in how you're viewing margin preservation or progress versus share in the near term? Or how would you describe that?

Yes, Michael, first of all, obviously, as you know, I can't comment on the competitive price move or but the plan or not plan I can refer to what is not on the slide, but what we've seen in October, and we've seen price moved by the competitors. So -- but that's just what we see, and I can't speculate on going forward. As we've shown in Q3, we will take the lead, and that's what we're doing because it reflects real cost, it reflects real material costs and real tariff costs.

So yes, we take a very rational approach and but it's in the context of what you alluded to is our focus is on margin expansion. And that is our focus in Q4. That's our focus in 2017, and you will see that also when we talk about it. And if sometimes you go a little bit ahead and you take a certain risk on the share, that's what we will do and what we've been doing, but all in the context of margin expansion and frankly, even if I look year-to-date, our overall year-to-date market share is pretty stable. That comes from very strong new products and today, partially you saw already something. But in particular, when you look at our Q1, what we will show where we have a lot of strong products coming.

And that's why I think it's also -- I think we can take a certain risk on pricing because we have good products.

Got it. Got it. Okay. And then shifting gears, I want to make sure we understand your comments about steel dynamics. So I think we all appreciate as a large volume buyer not paying anywhere close to what the spot rates would have done. But I think conceptually, you guys are -- your steel buy is multibillions in the U.S. alone I believe, correct me if I'm wrong.

So even if it's not 50% even in its 20%, 10%, I mean that could be theoretically hundreds of millions of dollars in terms of incremental steel costs to you. And when I look at your bridge in the second half of this year on raw mats in total, raw mats in total aren't that bad. So your comment about that being largely reflected in the second half. Can you just flesh that out a little and maybe again, like correct us if we're wrong on kind of ballpark there, but help us understand what you're really trying to say on steel into '27?

Yes, Michael, just as a caveat is, of course, I don't want to tell every of my competitors what I'm doing on steel. Second of all, we have steel partners out there, and we're trying to be respectful and not revealing too much detail. To give you a little bit broader context and some of you followed that very closely. A couple of years ago, we changed our steel contracts from annual steel contracts to multiyear steel contracts. That was actually pre-election pre-tariffs because we just want to be secured and we didn't want to have big surprises.

We -- steel contracts, in their nature, are a little bit like a hedging contract. So you basically typically define certain floors. You define a certain cap, and you typically agree on a trailing price versus a spot rate. So it's a combination of this one. What it basically does is it gives you clearly a certain buffer. It gives you too big a discount versus spot rates, but ultimately, it doesn't completely disconnect you from a long-term steel price trends. That's the reality.

And we felt that also in '26. So yes, we had multiyear contracts. But given that the steel prices went pretty much for roof, we also felt it. I really want to emphasize A big part of that cost is sitting in our Q3 and Q4 margin. So a big element of our Q3 is not in line with our expectation was actually raw material being very prominent in this one.

In that context, Mike, we have secured 2 of these long-term contracts already because they pretty much expired or are about to expire and we renew them. And as I really want to emphasize, I would call them at fair prices. Not hugely positive or negative, but it gives us a certain predictability. And we know pretty much what we carry into next year, which again, is not too different from our Q3 r Q4. There's one contract which is still open, but I'm confident we can close that also pretty soon.

Of course, there's always a question what happens to steel price in the long term. And we're all seeing this massive run-up in the last year of basically almost 50%, which I want to emphasize is disconnected from iron ore prices. So there is not a big rationale element behind this one. And ultimately, we also know thankfully, some of the steel producers are putting in capital investments to improve productivity because, as you know, American still today is not cost competitive versus China or Europe by a wide margin.

And we welcome these investments to make it more productive and competitive because we all believe in a strong American steel industry, but it only works [ if it's ] competitive. And there is capital investments, we're going in the right direction. You also know where our capacity investment plan, which may not immediately help you for '27, but over time, we'll bring a, what I would call, a much healthier, much stronger U.S. steel market.

Your next question comes from the line of Susan Maklari from Goldman Sachs.

My first question is going back to your comments, Marc, on the channel inventories. It sounds like they are running fairly lean despite the deceleration in demand that we saw this quarter. Can you just give a little more color on where things are, what that implies for the fourth quarter and as we think about going into next year?

And within that, as you mentioned that your market share was stable, is there any mix shift in terms of the floor space that you're -- that you have that could also be a benefit as we think about next year as those new products continue to come through?

Yes. Susan, let me start and maybe also and Carlos can give some additional color on this one. So first of all, I would say, trade inventories and our inventories are low. And I'm talking about North America, in particular. So I think there is a certain cautious side, both with the trade and frankly also with us. So I think the combination if you would look at an aggregate number of inventory between us and our retailers with pro 1 of the lowest in multi years.

Again, that's probably more reflective of people we're cautious about the current market. which for Q4 means also we certainly don't have to lower production any further. So all the volume deleveraging, which we talked about is largely behind us. So we're sitting right now on low inventories, and we're actually carefully because we don't want to overshoot kind of ramping up production also to be in the right inventory position as we head into '27.

So right now trade inventories are low, which by the way is also part of the reason by industries and our revenues were also down in Q3 because we know specifically where some of our retail partners reduced inventories. But again, it's right now, it's certainly not elevated. It's quite the opposite. And we will -- we have work also in front of us to kind of rebalance everything.

I would just add to consumer confidence and market volatility is what is translating into trade and also being a little bit more cautious on the supply chain and be more effective. Like Marc was commenting, we will be able to live more of inventory so we can get that one back on track, and we can capitalize on growth opportunities moving forward.

So the only other comment I want to make relates to your mix question. I mean, as we talked about, and we didn't reiterate today we feel despite the softness of a discretionary demand side, we feel very good about the premium products we brought to the market this year. So the kind of volumes, which we've seen on the kitchen at build in line some of our French or bottom out, which we brought to market, we feel very good. So that -- it works even more the discretionary environment is just very soft, but even I'm giving that into context, I'm really pleased -- and again, we will talk a lot more in our generic call.

We're now bringing a major push on our premium laundry space, which has not yet launched, but we launch throughout Q1 and Q2 where we have another strong element to help on our mix, despite discretionary poor or discretionary soft environment, which probably will be around us for some time.

Okay. That's great color. And then maybe shifting to the balance sheet. You've obviously done a lot in the last couple of quarters to restore your liquidity and you're guiding to having less than $4.5 billion of debt by the end of the year. At a high level, do you feel like you have enough liquidity to operate in this kind of an environment?

And can you just talk about the ranges and what happens if things continue to stay more challenging versus perhaps an incremental recovery next year?

Thanks,. So a very, very short answer to your question would be, yes, we absolutely have the liquidity and the financial flexibility that's needed to operate in this challenging environment.

The longer portion of the question is, as I mentioned in my earlier remarks, I am very, very happy that we very early on took the proactive steps that we needed to have the liquidity for us to operate in an environment that, at that time, we saw was challenging. What that has led to us is a situation where now we have over $3 billion of available liquidity in a combination of cash as well as our asset-backed lending credit facility.

We are now in a position based on the strong work that we've been doing in working capital to adjust the guide for the net debt to say that it is one that will be lower to a number that's below $4.5 billion. But then the other thing, Sue, as I've touched on before is based on these proactive actions that we've taken, we've cleared the runway in terms of the next time we have a huge debt maturity, it's not until 2028, which gives us the opportunity with the proactive board actions we've taken in terms of cost and pricing going into 2027, to bring us to a position where we can expand margins and that also would then contribute overall to the free cash flow and contribute to our priority, which is paying down our debt.

Susan, let me maybe add some additional comments on the balance sheet because obviously, everybody knows we've done a lot of actions in Q1 and Q2 be it between equity offering, renewal of revolver credit in some bonds. Some people probably accuse us, well, you went too far. But in reality, if we would do the same action, first of all, keep in mind, it would cost us 1 point to 1.5 points more than it did half a year ago. So we're actually in hindsight very pleased with the timing of when we took the action.

Two, to give a little bit color on liquidity, yes, we took a lot of time to renegotiate revolver credit. We have not used the revolver since August. It's 0, i.e., we haven't even tapped into this one. As Juan pointed out, we have a lot of liquidity end of the year. Some people might even argue too much liquidity.

But I think seeing what has happened around our industry for the last 2 or 3 years, we want to be on the safe side. I'm the first one to admit the success liquidity cost us interest, and that's why the big part by EPS was disappointing also but right now, I'm prepared to carry a little bit too much liquidity around us because we're living in a very uncertain environment, but we feel very good about the strength of liquidity, balance sheet, the maturities where we are. So I feel much better despite all the negative news in the industry.

Your next question comes from the line of Rafe Jadrosich from Bank of America.

Just on the working capital improvement that you're talking about for the fourth quarter and the full year, can you talk about how much of that is sort of structural versus onetime and how do we think about that going forward? Is there any specific metrics around like AR, AP that we should be thinking about in terms of a target?

So Rafe, I would say, let me split it in 2 pieces or 3 of working capital. I think on inventory levels, I don't think with the current system constraints, I don't think we can go a whole lot lower. I mean we and we're testing this limit every day, but we're now over time, can we -- I would say, over timing 1 or 2 years, can we further improve our system, become better and how we manage inventory, yes. But it's in the current constraints, there's not a whole lot we can do more.

But payables, as you all know, largely follow what we do in our inventory because it's basically just production. Having said that, we've made some good structural progress on extending some terms. Not only with overseas suppliers but also some other suppliers. So we feel good about work, which has been done over actually the last 1 or 2 years on structurally expanding payment terms.

On receivables, I would say there's going forward, there's still some opportunities on addressing some of the terms because I think some of the terms do not necessarily reflect inherent logic that they should cover the inventory, i.e., we give more terms when they carry inventory. And that will be a discussion which we will have with our partners from the retail side.

The one big element you guys should also all keep in mind is a part of a working capital improvement comes also, yes, our Q3 revenues were down. Revenues are down but working capital requirements, in particular receivables also come down. So there is also an element of just reflecting to you brief in or brief out on the top line, which ultimately comes through in the working capital.

That's very helpful. And then the second question, just when we think about the outlook in LatAm, specifically just Brazil, 2 things should -- can you remind us what the FX assumption is just because it's changed really materially in the last like 40 hours or so, like what's baked into guidance?

And then what's the sort of time line for recovery? And like what's the process right now with Casas Bahia, understanding you have the insurance recovery, but like on the fundamental standpoint in terms of the inventory clearance like like where are we in that process?

So Rafe, let me maybe address the overall current and [ Ron, ] if you can address the customer here recovery.

So on the FX, first of all, I mean we typically don't publish our currency assumption. Having said that, keep in mind, when we talk about the Brazilian real, and obviously, you followed it, but day after election moved by 10%, which by way is pretty close to where it was at the beginning of the year, just to put it in context.

So yes, we've seen that massive currency move. There is elements, which call it softened a little bit. One is, of course, we have hedging in place in a strong rand environment, hedging cost to you, and now we will see the hedging benefit. So we're we will see only a fraction of these moves in our actual P&L once you net out the hedging. The second thing is which you also need to keep in mind, more operational. I'm not -- Yes, some of the components over time because some of them are imported, then cost you more.

At the same time, it makes the imports of finished goods a little bit more expensive. And keep in mind, we're a local producer. So from a competitive environment, [ I bet ] that's not necessarily all bad news for us because, again, we are a local producer in Brazil, much like where local producer in the U.S. So it's not all bad. But given that it is fresh, very transanal, we're now going through all for potential ramifications, which come with election outcome in Brazil.

Yes. In regards to the GCB recovery, there's a lot of uncertainty out there. The decisions from the judge on the bankruptcy proceedings happened just last week, which starts the clock a 60-day clock on the restructuring plan. So we're watching that intently. Obviously, we're a very big supplier to GCB a verb player in Brazil.

So we have a seat at that table, and we'll be watching how these guys proceed in terms of recapitalizing the business. This is going to take a little bit of time. We'll have more visibility as we exit Q4. Sequentially, therefore, there's not going to be a whole lot of change from Q3 to Q4. But we expect things to normalize going into '27 as the volume gets redistributed to other players and/or GCB reemergence with a much better structure.

Your next question comes from the line of Jeffrey Stevenson from Loop Capital Markets.

Today. I wanted to follow up on Latin America. And I wondered whether the 10% price increase across the region was incremental to the August 5% increase you announced last quarter for Brazil? Or was the timing push back on that? And then could you also talk about any sequential change in promotional intensity in the region as we move through the back half of the year?

Yes. So the pricing we took in August, this was specifically Brazil pricing to the extent of about 5%. So we've actually being fairly pleased with the fact that our volumes held as we went through that price increase. Obviously, we were also dealing with the Casas Bahia situation at the time. So that led to a little bit of erosion in that pricing realization, but it's still there and being realized.

The up to 10% price is across the entire segment. So it's -- there's a wide range across the various markets that we deal with. Some of that is going in markets very, very shortly. You'll see limited impact in Q4 when it's all said and done, given that we're sort of unwinding and some of that will hit mostly December but not have a whole lot of impact to the quarter.

With that, we're also to the second part of your question, we're moderating to some extent, the promotional activity around Black Friday, again, in a variety of markets, in particular, I would say, in Mexico at this point into some [ dare ] as well in Brazil.

No, that's very helpful. And then I was hoping you could provide more color on the meaningful demand shift in your SDA global business from the third to fourth quarter, where you're seeing orders up 40% in October. Just any more color there would be helpful.

Yes. So maybe let's take a quick step back on sort of how this business works, specifically in the U.S. You have large trade partners that buy in what we call bulk orders for the season to get ready for the [ meter ] activity happens around Black Friday in particular. These bulk orders will sometimes concentrate more so in Q3, sometimes more so in Q4. And this year is a year where they have shifted Q3 to Q4, which led to this more muted top line in the third quarter for the business.

The result of that is visible and tangible at this point. In our hands, that's the 40% increase in our order position as of this point in the month of October. Going into the quarter, we also had an extremely strong year-over-year comp in terms of orders on hand for the entire quarter because the good news is while these bulk orders are bulky -- or lumpy, I'm sorry, they are known. And so we're readying ourselves from a production standpoint as well as from a shipment standpoint. They are on our hands in our books and they're being shipped as we speak, which again gives us really strong confidence we can have a fantastic Q4 and exit the year at double-digit growth consistent with the guidance we've given.

And Jeffrey, it's Marc again. I know this is a Q3 call, not necessarily an October business review, but obviously, just to echo what Ludo was saying, October for SDA because it's almost done, is a very, very strong month, which exactly confirms an actual what Ludo pointing towards to. So we feel very good about the SDA run rate and the over Q4. So we feel very good and exactly confirms what Ludo was highlighting.

Your next question comes from the line of Sam Reid from Wells Fargo.

I wanted to touch on the builder channel here. I believe your pricing in the channel is already in place. Just want to discuss realization, any benefits that you got from that in the third quarter or whether that's supposed to ramp into the fourth quarter in 2027?.

Sam, it's Marc, maybe I will have Juan Carlos to add on this one. I think what you're pointing out is a very important aspect, but the builder segment, as you know, is a very big part of our business. Unfortunately, not that big as it could be because of the market environment but it's a big part. But pricing mobile is not as straightforward as with retailers, very simply because builders give out quotes and we give course to build this quite a bit in advance.

And in many cases, we have annual or national contracts. So -- and of course, we're trying to find with our builder partners the right balance between not breaking quotes, which we've already given, but at the same time, not dragging our price increase forever. And that's a careful balancing app, which we've, I think, done in partnership with our builder partners. So I would say in Q3, we've gotten some pricing, in particular towards the end of the quarter, more and more of the pricing, maybe not fully to the level of retail, but we'll continue to work our builder partners to kind of make sure we reflect the real cost and keep also in mind in particular builder segment, you have cost increases coming from final mile delivery to construction sites, which are significant. We are getting it, pursuing it.

I think there's a good discussion with our builder partners because they understand these costs. But of course, nobody wants to surprise the final consumer with a cost increase.

What I would add, so it is consumer pricing plus support that we give to the channel. In Q3, we saw a significant improvement between Q2 to Q3 more than more tended to Q3, and we will see some of that also coming in Q4. But it is pricing in the quotes plus the adds that we have on serving the customer, especially on the final mile like Mark was commenting. -- but that comes with a little bit of lag, and we saw in Q3, and we will see more in Q4.

That's helpful. And then maybe let's switch gears and talk commodities a little bit. So I understand you've locked in, I think, 2 of your major steel contracts, but there is that third 1 that's still out there. I think you mentioned that you've had some visibility into that soon. Maybe just contextualize the timing there and then perhaps the magnitude of how large that contract hypothetically would be, so we have rough senses to implications for 2027..

Yes, Sam, now getting really into the details of lower steel contract. And again, that's why I'm not quite sure I want to share with our competitors everything we're doing. Again, we're -- we have locked in 2 of the contracts and they are fair terms. The third one is, I would call it an advanced stages. And I'm confident we can close it. Keeping also in mind we have flexibility on shifting volumes between different partners. And between all of this one, I'm very confident we can close it very soon.

And -- and again, from today's perspective, assuming steel prices stay this -- at least stay on the super elevated level, which we are right now, I think we will not have a huge surprise coming into '27.

Your next question comes from the line of Eric Bosshard from Cleveland Research.

To follow up, I heard the comment about making good progress with price on builders. That chart was super helpful of progress on retail pricing. The yellow line was helpful. It must be apples and oranges, the flow through of that I think you reduced your price mix number. And so can you just help me square like lots of progress, except that the realized price mix is less than what was targeted 90 days ago? What's the difference between those 2?

So I mean, Eric, again, first of all, just to clarify, this chart, which you see on Page 11. Given that this is a price graping tool, which we get every week basically from websites, literally 10,000 of data pretty much on a monthly base. But by definition, is retail, it's not necessarily builder price, okay? So that's -- well, unless -- the indirect builder pricing, which will come through some of our home improvement channel. So -- but it's largely a retail pricing.

The builder pricing, of course, is a whole lot less covered and track-proof for the real data. Again, having said -- and I want to repeat what I said before, we got significant progress in Q3 on the builder pricing. It is -- it was clearly and is delayed versus the retail pricing. And that is simply driven by the fact that [ Nibbles ] now want to kind of give a huge surprise to consumer who already agreed on a certain overall price. And that's what we're kind of managing through but right now, I would say, overall, the moves on the builder pricing are just happening the same way, just a little bit later. Any comment?

I would just say that it's magnified with a lower mix basically because of the replacement market. So that's kind of also impacted in the PMR.

In terms of the global price mix, the 2 things to keep into consideration is, one, it does not only reflect the U.S. So the decline that you're seeing is also us reflecting the GCB bankruptcy reorganization impact. that Ludo just touched on from a mix standpoint. And then the second element is the element exactly that Marc and JC just touched on, which is the mix related to the replacement demand. And us just reflecting that in the overall price/mix number. The pricing itself is absolutely on track.

Okay. Perfect. Great. And then secondly, the progress you've made on price and the additional price -- this is a North American retail question. In aggregate, it's like 15%, almost 20% price into North American retail, North American consumer. How are your thoughts about making that level stick? And does that have any impact on demand or mix? Or does that just basically flow through?.

So Eric, again, specifically in North America, again, when we talk about these very big increase number. That always relates to January 2025. And as you saw last year, we already took some price, so year-over-year, it's a little bit less than since January overall. Having said that, and this is what you saw in Q3, I think, by and large, is sticking. And whenever we see certain elements where we are, of course, correct, we like the course correct, but by and large, is sticking.

I absolutely today do not see an impact on the overall category demand from a consumer perspective. Again, it's a replacement market. Consumers know -- have to replace a product, typically the awareness of a consumer going into a store up expected prices to limited. So by elasticity, if you want to say so, is very limited. Having said that, you do see sometimes that a consumer wants to just stick to a certain budget, i.e., consumer goes in the stores, I don't want to spend more than $600 on the top loader.

So what it basically means for us, it could be the consumer mix down on price point or 1 SKU from our perspective. And that's exactly what we're kind of trying to balance between what is the benefit of raising prices versus how much you lose on the mix side, I think over years, we've gotten a pretty good experience in how we fine-tune that, and that's what we do also going forward.

I will ask Eric is our new product launches, and we described 2 of them in the presentation, but we've been talking about them throughout the different earnings release, that is supporting and enhancing our margin expansion and top line growth. So we will continue leveraging our product launches to be able to drive innovation, pricing and margin expansion.

Your next question comes from the line of Andrew Carter from Stifel.

I wanted to ask, and I know what I'm kind of thinking through on your actual pricing is kind of -- is difficult, but I think you would be probably from what you're saying at retail and what's flowing through somewhere in the kind of mid- to high single-digit range. Your organic growth in the fourth quarter -- our third quarter was down 8% in North America. That puts your kind of shipment volume whatever in the minus 12. I realize there's some mix in there.

That's probably unfavorable. But that compares to AHAM shipments down in the minus 3% range. So I guess, first off, like you said you were holding market share earlier. So how do those 2 square? And anything you can give us on POS, where you have visibility of your brands relative to the overall category?

So Andrew, there's a very simple answer this one. Our market share this year is very steady throughout all 3 quarters. You had last year following our price [ goes ] you had in Q2 a very soft market share and in Q3, a much higher market share. So it's a pure baseline comparison. Actually, if I look at our market share Q1, Q2 and Q3, it is very, very stable, and I feel very good about it.

Having said that, we monitor our POS trends every week and see exactly what we need to be doing and what we don't need to be doing. But it's -- of course, we saw in the month of September and also October, the industry was soft. And of course, we see that also reflected in our POS trends. There's one big element, which I want to also add, which is a point of strength for us increasingly we typically have POS data from our big trade partners. But there's still a very significant independent retail all builders, and particularly in independent retail, where we actually have strengthened our position over last year. And that is a little bit richer from a mix perspective channel. It's not fully captured in POS data.

So I would say whatever we might lose on some POS accounts we have right now good compensating element on the independent retail.

Next question, I guess, in terms of -- you said at the top of the call, you wanted to expand margins in 2027. I guess, simply put, at this point, with the cost savings you have in hand, the kind of known inflation -- what kind of pricing do you have to execute next year? And could you do it -- could you hold margins in a flat volume environment with your savings, pricing, et cetera, next year?

Yes. So Andrew, of course, we're not yet giving 2027 guidance. Having said that, our clear focus for Q4 and also for next year is margin expansion period. And we -- as some of you followed us a little bit longer. Every once in a while, every couple of years, we have a clear focus on margin expansion, and we tend to be doing what we talk about. And that is the #1 priority across the entire company. Of course, if you right now add up what we're doing in the structural cost increases. And if you add on top of that, the carryover pricing would feel very good against that objective.

But we all experiencing '26 the macro environment turned out very different than we assumed in January, okay? That's the reality. Not bad would like it, but that's reality. So as you would expect from us, we're kind of right now having plans on margin expansion which might go well beyond what we actually end up communicating. But again, that's a decision which we'll make in January once we see the year unfolding.

But from an underlying work, which has been done with structural cost takeout, and the pricing action, I think we set ourselves up for what I would call a very solid foundation for margin expansion.

So with that in mind, I think that was the last question. I'm not even sure I should repeat what I just commented, but again, it's -- I want to reiterate is, of course, '26 was full of challenges, and I'm not blaming external environment. We focus on what we can control, and that is cost takeout and pricing. You heard us talking quite a bit about it. We are, I would say, beginning to be cautiously optimistic about '27, but we also recognize we have work to be done and we're still living in a very volatile overall macro environment.

With that in mind, I want to thank you for listening to us and hope to talk to you sometime soon. Thanks a lot.

Good morning, and welcome to Whirlpool Corporation's Second Quarter 2026 Earnings Call. Today's call is being recorded. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer; Roxanne Warner, our Chief Financial Officer; Juan Carlos Puente, our Executive President of North America and Global Strategic Sourcing; and Ludovic Beaufils, our Executive President of KitchenAid Small Appliances and Latin America.

Our remarks today track with a presentation available on our Investors section of our website at whirlpoolcorp.com. Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements to assist you in better understanding Whirlpool Corporation's future expectations. Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K, 10-Q, and other periodic reports.

We also want to remind you that today's presentation includes the non-GAAP measures outlined in further detail at the beginning of our earnings presentation. We believe that these measures are important indicators of our operations as they exclude items that may not be indicative of results from our ongoing business operations.

We also think the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operations. Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. [Operator Instructions]

With that, I'll turn the call over to Marc.

Thanks, Scott, and good morning, everyone. During today's call, you will hear 3 key messages. First, our Q2 performance was in line with our expectations despite the persistent macroeconomic challenges impacting our industry and the broader economy.

Second, we delivered sequential margin improvement in Q2, and we expect margins to continue improving throughout the remainder of 2026. North America, in particular, delivered strong operational progress relative to the first quarter, supported by our second quarter promotion pricing increase and a strong lineup of new products. While we recognize that there is more work to do, this is a clear step towards stabilizing our business.

And third, we continue to take decisive actions to better position our business in the near term and capture the upside when consumer sentiment and the housing market rebounds. We are reaffirming our full year operational outlook and adjusting EPS to reflect the updated interest expense expectation following our recent refinancing activities.

Turning to Slide 7. We will further discuss some of the decisive actions taken to better position our business. We have accelerated the cadence of our new product launches and we are performing exceptionally well. In 2025, we transitioned over 30% of our MDA portfolio in North America into new products. That is 3x more than we would typically transition in a year and the largest portfolio refresh in the last 10 years.

In 2026, we had an impressive performance at the Kitchen & Bath Show, winning 23 awards and are on track to launch more than 100 new products. Our trade customers and consumers have reacted very positively to these new launches. Juan Carlos and Ludovic will provide more details on how some of these recent launches in MDA North America and SDA Global are performing. In our last call, we discussed our announced price increases to mitigate years of cost inflation and some residual impact of tariffs.

I'm very pleased to report that our execution of these increases has been strong. The initial benefit is already showing up in our sequential margin improvement, and we anticipate further incremental margin gains moving forward.

We also announced new pricing actions in Latin America effective in August, which, in combination with some of our strategic launches, in particular in refrigeration, are expected to restore margin in what has been a highly competitive environment. We continue to accelerate our structural cost takeout actions to help offset macroeconomic headwinds and to drive meaningful carryover benefits in the years ahead.

Recently, we announced footprint changes that are expected to deliver meaningful cost savings starting in Q4 of 2026 across key manufacturing facilities in Amana, Iowa, Rio Claro, Brazil, and more recently, Ramos, Mexico. We're also optimizing our logistics network, reducing the number of local distribution centers by 25% while maintaining a strong footprint that places 97% of our customers within 100 miles of an LDC.

This allows us to maintain high reliability, on-time delivery, and maintain lead times. As we optimize our global footprint, we're also investing in growth, including our new manufacturing plant in Perrysburg, Ohio. Together, these actions accelerate our path to vertical integration, automation, and supply chain modernization, reinforcing our competitive advantage as the leading domestic appliance producer.

Finally, we have completed a series of strategic actions to strengthen our balance sheet and expand our financial flexibility, giving us the resilience required to navigate the volatile macroeconomic environment while continuing to fund our organic growth. A look at our balance sheet before and after these transactions shows a dramatic improvement in our near-term liquidity and capital position.

Our strategic recapitalization strengthened our balance sheet. Our recent bond issuance successfully cleared our 2026 and 2027 debt maturity, giving us a clear operational runway. We completed a secured asset-based lending credit facility that provides us with the needed liquidity and financial flexibility to operate in the current volatile environment.

Lastly, we completed the sale of our interest in Beko Europe B.V., primarily for cash consideration, further enhancing our cash position. Importantly, our core capital allocation priorities are unchanged.

Turning to Slide 8. Let me cover our second quarter results. We delivered net sales of $3.5 billion, which was impacted by softer industry demand in North America and promotional intensity in Latin America. However, we saw a sequential margin improvement of 50 basis points to 1.8%, resulting in ongoing earnings per share of negative $0.21.

As mentioned earlier, in line with our capital allocation priorities, we successfully sold our minority stake in Beko Europe B.V. for approximately $128 million, generating roughly $84 million of net cash consideration. Our free cash flow was a consumption of approximately $1.1 billion, which was largely driven by lower earnings in conjunction with seasonal working capital.

Turning to Slide 9. I will walk through our sequential ongoing EBIT margin drivers. We delivered margin improvement of approximately 50 basis points quarter-on-quarter. Our previously announced pricing actions in North America favorably impacted margin, fully offsetting unfavorable price/mix in Latin America and resulting in 225 basis points of improvement. Net cost was a tailwind of 100 basis points as we compared to the higher costs associated with our inventory reduction actions in the first quarter.

Raw material inflation unfavorably impacted margin by 50 basis points, primarily driven by elevated steel and base metal costs. Net tariff impact was an unfavorable 200 basis points, driven by implementation of Section 232 and realizing credit benefits of the IEEPA decision in Q1. Marketing and technology as well as currency, each represented a headwind of 25 basis points, partially offset by favorable transaction impacts of approximately 25 basis points.

And now I will turn the call over to Juan Carlos to review our MDA North America results.

Thanks, Marc. Turning to Slide 11. I will provide an overview of our MDA North America segment. In the second quarter, net sales were $2.4 billion, up 8% sequentially from the first quarter. We saw sequential EBIT margin improvement of 240 basis points, driven by the strong execution of our previously announced promotional price increase and the progression of our structural cost takeout initiatives, partially offset by higher raw material, fuel, and tariff costs. As expected, U.S. industry demand was down 3.4% year-over-year.

Turning to Slide 12. I want to remind you of the significant pricing actions we announced last quarter. We executed a promotional price increase of more than 10% relative to the first quarter prices, effective in late April. This was the most impactful action and started to positively impact our P&L in May, with incremental benefits ramping up through the remaining of the year.

We also announced a list price increase of approximately 4%, effective in July, which we expect will benefit the third quarter results. We can see positive impact of these price increases on our sequential margin improvement, as well as in the retail sellout price data.

Turning to Slide 13. Let's review our sellout price data. This chart represents the aggregate view of thousands of price data points collected weekly based on publicly available data. The yellow line shows that our prices are progressing as expected. The blue line shows that the competitor average pricing has also meaningfully moved upward since the beginning of 2026.

We are seeing resilient demand despite the price increases. In the current softer housing market, appliance demand is largely replacement-driven and relatively price inelastic, at least until consumers reach the point of sale and compare options. More importantly, we are able to hold our market share, showcasing the success of our robust product innovation.

Turning to Slide 14. I will review our newest kitchen suite, coming to market in Q3. In line with our strategy of driving premium mix, we are incredibly proud of the new KitchenAid Porcelain White suite. The elevated neutral color tone can be paired with our interchangeable handles and knobs, allowing consumers to personalize their kitchen suite. This premium product is a great addition to our portfolio and one that fits squarely within our strategy to drive premium mix.

On Slide 15, we can see how some of our recent product launches are driving notable growth. Our Maytag Top Load Washer gained approximately 1 point of laundry share, a result largely influenced by our new pet hair removal impeller.

The new KitchenAid suite has been exceptionally well received and has driven an impressive 20% year-over-year brand share growth. Lastly, our industry-first Whirlpool UV Laundry Tower has rapidly captured approximately 10 points of share in this category.

Turning to Slide 16. Improving profitability is not just a pricing story. That's why we continue to focus on our structural cost takeout. We remain on track to deliver $150 million in cost takeout in 2026. Of the $150 million target, we expect approximately $60 million in savings from our automation initiatives, $15 million from strategic sourcing, and $20 million from our targeted fixed cost actions in our corporate center.

On strategic sourcing, we are deepening our relationships with critical suppliers in creating a win-win opportunity that drives mutual operational growth and margin enhancements. The acceleration of our footprint, strategic sourcing, and corporate center cost reduction actions are expected to help mitigate the headwinds associated with higher fuel costs, volume deleverage, and inflation. This illustrates how we are laser-focused on delivering against what we can control.

Turning to Slide 17. We're maximizing benefits from our manufacturing and supply chain footprint to strengthen our structural competitive advantage. In our last earnings call, we discussed key manufacturing footprint changes that we announced in Q1.

First, a multiyear modernization efforts on Amana, Iowa, that will refocus our manufacturing on bottom mount refrigeration and optimize our parts production and subassemblies, generating an expecting annualized EBIT benefit of approximately $70 million.

Second, our $60 million investment in our new state-of-the-art production facility in Perrysburg, Ohio, focused on accelerating vertical integration, which we expect to generate annualized EBIT benefits of approximately $30 million.

And lastly, in the second quarter, we announced our plan to shift our Mexico refrigeration production from the Supsa plant to our Ramos manufacturing facility in our existing supply chain. All of these moves drive significant structural cost benefits, with EBIT benefits starting in Q4 of this year and significant carryover benefits in 2027 and 2028.

Additionally, the consolidation of our U.S. distribution centers, where we are reducing our local distribution centers from 126 down to 94, alongside the consolidation of our regional distribution and return centers, is expected to unlock another $60 million in annualized EBIT benefits while maintaining reliability and delivery speed. Combined with the structural advantage of the updated Section 232 tariff framework, we are highly confident in the long-term profitability of our North America business.

And now I'll turn the call over to Ludo to review MDA Latin America and SDA Global results.

Thanks, Juan Carlos. Turning to Slide 18, I'll review the results for our MDA Latin America business. Excluding currency, net sales decreased 2% due to negative price/mix, partially offset by higher volume in Brazil's highly intense promotional environment. This negative price/mix resulted in an EBIT margin of 3%, despite a tax case-related net gain.

Turning to Slide 19. Let me highlight the main actions that are underway to restore our margins in Latin America. First, we have announced new pricing actions in Brazil, fully effective in August, resulting in an overall increase of approximately 5%.

Second, we're driving premium mix through product innovation in our direct-to-consumer channel. In particular, we have completed the relaunch of Brastemp's laundry, top-mount refrigeration, and bottom-mount refrigeration lineups, and we're about to launch our new French door refrigeration line.

We are also deploying the Whirlpool and KitchenAid products Juan Carlos referenced earlier into the relevant countries in Latin America. Lastly, we are executing a comprehensive operational review to aggressively reduce both variable and fixed costs across the region.

Turning to Slide 20. Our SDA Global business continues to deliver solid results. We achieved an EBIT margin of approximately 12% in the second quarter, in line with expectations, while successfully funding our planned marketing investments. Underlying demand is positive with double-digit sell-through growth and share gains globally, driven by product launches and continued expansion of our direct-to-consumer channel.

However, we did experience a temporary but sizable trade inventory burn in Q2, which impacted our top line results. Overall, our performance in the first half of 2026 was in line with expectations, achieving growth and double-digit margins while reinvesting some of those gains to fuel future organic growth.

On Slide 21, I will review 3 of our latest innovations that are instrumental to our growth trajectory in the second half of 2026. The Artisan Plus stand mixer with its new bowl light and precision speed controls has been an absolute hit so far, driving approximately 1 point of share growth in the U.S.

Our new line of compact, fully automatic espresso machines is expanding our presence in a fast-growing industry category that has expanded over 25% in the U.S. through May 2026. It started to hit the shelves in Q2 and has already shown strong sell-through performance. And our Pure Power Blender has delivered standout growth internationally, securing an impressive 10 points of incremental share in Canada as an example.

To summarize, we've had a strong margin-accretive first half performance. We have continued to invest in growth and are seeing great success with our most recent product launches. On top of that, we have more launches coming in time for the holiday season. All of this gives us confidence in our ability to continue to capture double-digit growth globally at the highly accretive margin we've been guiding towards.

Now I will turn the call over to Roxanne to review our balance sheet and capital allocation priorities.

Thanks, Ludo. Turning to Slide 23. Let me review the decisive actions taken recently to lock in our liquidity and clear our debt runway, creating balance sheet flexibility. We executed our $1.1 billion equity offering and made the prudent decision to suspend the common dividend to maximize our cash preservation, improving near-term liquidity. We finalized a $2 billion asset-based lending facility to provide financial flexibility.

And finally, we issued $2 billion in secured bonds, which removes near-term refinancing risk by addressing our 2026 and 2027 debt maturities. Combined, these actions significantly improved our financial flexibility, cleared our debt maturity runway, and have positioned our business to better participate in growth opportunities.

As you can see on Slide 24, these actions have successfully secured over $3 billion in liquidity and cleared our debt maturity ladder until 2028. This gives us the financial runway necessary to execute our operational plans and improve profitability while still navigating an uncertain macroeconomic environment.

And while this recent bond issuance increased our gross debt, our net debt in Q2 stayed largely flat at $5.8 billion. We maintain our commitment to deleveraging, and we expect to exit 2026 with a net debt below $5 billion.

Turning to Slide 25. Let me outline an update to our capital allocation priorities. Investing in organic growth through product innovation is critical to our business and will continue to be one of our top priorities. We will continue to invest in product innovation, digital transformation, and cost efficiency projects with approximately $400 million of CapEx expected this year.

To support our balance sheet strength, we strategically raised gross debt through new bond issuances. We have successfully completed the divestment of our interest in Beko Europe, and we will continue evaluating all options to further strengthen our balance sheet.

Turning to Slide 26. We are updating our earnings per share guidance range as a result of the revised interest expense associated with our recent bond issuance. Our operational outlook is unchanged. On a like-for-like basis, we expect revenue growth of approximately 1.5% in 2026. We expect full year ongoing EBIT margin of approximately 4%, supported by continued momentum with our new product launches, pricing actions, and structural cost takeout.

Free cash flow is expected to deliver $300 million or approximately 2% of net sales, driven by significant structural inventory optimization. We are updating our full year interest expense outlook from $300 million to $350 million as a direct result of our recent debt refinancing activities. Guidance drivers and segment details can be found in the appendix of this presentation.

Now I'll turn the call back over to Marc for closing remarks.

Thanks, Roxanne. Turning to Slide 27. Let me summarize what gives us confidence that our business is on the right track to deliver long-term shareholder value. Looking to the second half of 2026, we expect to see continued margin expansion as we move towards 2027.

The margin expansion will be driven by sustained momentum from our new product launches, the compounding benefits from the pricing actions we have already taken, and the structural cost reduction initiatives that are fully underway. We are taking decisive actions to create shareholder value now and in the future.

Our aggressive investments in our U.S. domestic footprint continue to strengthen our competitive advantage. And as we look further ahead, our portfolio of iconic brands and our leading established position in builder channel ensure we are well positioned to catalyze the tailwinds of the eventual U.S. housing recovery.

Now we will end our formal remarks and open it up for questions.

[Operator Instructions] Your first question comes from the line of David MacGregor from Longbow Research.

Just on pricing, can you just talk about what you're seeing in July that gives you confidence in the 4% list price increases? And also, I guess with regard to the PMAPs, how confident you are that the industry will maintain PMAP discipline through year-end promotions?

David, first of all, I mean, obviously, as we pointed out in the earlier remarks, we feel very good about how the pricing and the pricing actions which we communicated late April turned out during Q2. You saw a significant price increase on the promotional side. You also saw the effect of us reducing the promotional window, particularly around July 4. So that all worked out very well.

It is important to note, even on Q2, the fact that Q2 only had about 2/3 of a pricing impact, because, by definition, the pricing largely kicked in early May. So that is already carryover benefit. On the list price increase which we announced, and we have -- we announced a long time ago, and we're executing. And so far, we don't see a big issue. So we feel actually very confident about the journey which we're on the price increase.

The other element also for Q3, which we talked about earlier, we also have the effect of builder price increases kicking in Q3. That is something which we announced earlier. So put that all together, the carryover from a price increase in Q2, additional list price increase, and the builder pricing, that gives us the confidence that our pricing actions are really having good traction, and we feel good about Q3.

Good. Second question is just on net costs. And on the net cost guidance of 100 basis points year-over-year, this presumably would include the $150 million of cost takeouts, which implies that ex cost takeouts, the guidance is flat for the full year, if I'm reading that correctly. Can you just talk about that line and bridge for us the first half to the flat full year number?

Yes, David, and I would particularly point also to Page 9 of our presentation. You saw sequentially, we had in our pure net cost, i.e., our factory productivity, logistics productivity, we had about 100 basis points improvement Q2 versus Q1. Keep also in mind, Q1, we took a lot of inventory out. So that's a little bit the element kind of offsetting here in Q2.

Also going forward, we feel very good about the net cost actions which are in our control, i.e., engineering or redesign of certain products. So these actions are on track. But what is right now already was in Q2 a headwind is the raw material side is becoming more challenging. I mean we have -- on the steel side, we're on the very high end of the contracts, which we have. We have base metal increases. And as you all would have expected from oil price changes, there is some pressure on resins. So that's the offsetting element, which right now on a full year base would point out a little bit challenge.

The other element, and Juan Carlos referred to this earlier, we took fairly sizable and significant actions in the first and second quarter around our factory footprint, particularly related to Amana, Iowa, our Supsa factory in Mexico, and also our Argentina factory. These are fairly significant moves. The important thing, however, to note is the vast majority of the benefits are more like a '27 effect because it takes some time until you get the full benefit of this one. But there is also a portion in -- which will help us in 2026.

Your next question comes from the line of Sam Darkatsh from Raymond James.

A couple of questions here. The first, you obviously have a lot of pricing going through, largely matched by the industry. You also have difficult market share comparisons in the back half. What -- included within your guidance, what are you contemplating for a market share performance in the back half on a year-on-year basis?

Yes, Sam. So first of all, year-to-date, our market share, in particular in North America, is largely flat. We feel actually pretty good about -- obviously, we had significant price increase and we didn't lose market share. So that's a good element. In the back half, I mean, first of all, we have the effect of all these new product launches, which help us. So we have a good product mix, good product lineup that will help us. But at the same time, we will continue our strategy on promotions.

We will invest in promotions when it creates value for us and the retailer. And that may be a little bit the offsetting element. And you saw that also in even July 4. We didn't go all aggressive. I'll put it differently, we want to have structurally healthy organic market share, and maybe kind of give away a little bit of ground on some aggressive promotions. So that is our basic strategy. But even on a full year base, we expect a flat to maybe slightly up market share.

And then my follow-up question, and actually, I have a clarification question from David's prior question. Hopefully, this doesn't count. If you could characterize what you're seeing in July. But my actual question in the second half, you're guiding for effectively $1.6 billion in cash flows from operations. How much of that are you expecting in the third quarter versus your normal heavy fourth quarter cash flow generation?

Yes, Sam, let's come to as the next question 1B. So as you know, we don't typically give quarterly guidance on the cash flow. But I think there's one big element, and that's a little bit different from every years. We took a lot of effort to get our working capital in balance in the first half, i.e., we didn't produce as much as we typically would produce in Q1 and Q2. So we enter the second half with actually pretty good inventory levels, even to a point where we could actually slightly increase inventory.

So we feel very good about where we are from working capital, and we don't have to take that strong action, which we typically do in Q3 to Q4 to correct it. So we're in pretty balanced level here. And then on top of that, yes, we have the earning and the earnings expectation of the second half kicking in on this one. And that's why we feel confident about the $300 million plus free cash flow for a full year.

Your next question comes from the line of Mike Dahl from RBC Capital Markets.

Just on the -- another question on kind of the cadence. Obviously, in North America, the guide still requires you to do kind of a 6% in the back half after doing the 1.5% in the first half on an EBIT margin basis. So could you clarify kind of cadence of -- is it going to be in your internal expectations? Is that an immediate step-up from 2Q to 3Q to around those levels? Or should we think about the guide implying kind of a ramp and an exit rate north of that the way you contemplate it?

Yes. Michael, it's Marc. So first of all, I mean, I also want to point out between Q1 and Q2, North America had more than 2 points of margin improvement. So that was a very sizable step. And that is, as I mentioned before, with only 2/3 of a price increase kicking in, and there's more coming.

So obviously, with the price increase being successful in marketplace, I think these significant step-ups, as we've seen in between Q1 and Q2, we also expect going forward. So it's not all back-end loaded to Q4. But it is absolutely critical in Q3 that with additional pricing actions and the carryover momentum in pricing, that we have a similar step-up in Q3 as we had in between Q1 and Q2.

Okay. That's helpful, Marc. And then secondly, can you talk a little bit more about this, the inventory dynamic in SDA, what you think drove it, whether there was something that happened in kind of the cadence of sell-through trends that led to a different decision on inventory replenishment, where inventory levels sit versus your view of what would be normal.

And I think I heard you guys say you still expect that business positioned for double-digit growth. So just again, kind of square that with what played out between the sell-through dynamics and the inventory effectively destocking in 2Q?

Yes, Mike, overall, I think we're not at all nervous about the underlying growth of KitchenAid SDA. As Ludo pointed out earlier, even in the second quarter, the underlying sell-through in retail was double digits. There was an inventory reduction, or you can also put it differently. There was a very sizable order which came late in the quarter, so we couldn't recognize it fully.

July is looking already very healthy, and we feel very good about the July run rate. So we're absolutely on track with KitchenAid SDA with the underlying sales growth, and we feel very confident also about the full year guidance on revenues. But let me also -- Ludo, maybe you want to add a little bit from a KitchenAid perspective.

Yes. Just a little extra color. We had growth internationally in terms of sell-through that was in the very high teens, and that was also true in the U.S. So globally, we're looking at very high double digits, high teens, like I said, across the entire globe based on, in particular, our new product introductions, which have been received extremely well so far. So that momentum building early in Q2 really bodes well for Q3 and the rest of the year. And as Marc said, this one-off situation in terms of inventory burn is going to correct itself in Q3. We're very bullish about what that's going to lead to.

Your next question comes from the line of Susan Maklari from Goldman Sachs.

My first question is around the new products and how you're thinking about innovation. As you see the success of the recent launches coming through, and it seems like it's allowing you to not only maintain your share, but perhaps grow it, you're moving in line with the industry. How do you think about what that means in terms of future investments in innovation? And how are you balancing that relative to other needs for capital allocation?

Yes. Susan, I mean, first of all, I just want to echo again what you already highlighted and what we said also in the script. We feel really good about all the products which we've launched in '25, but also in '26. So this was not just a onetime shot in '25. '25 was just an extraordinary amount of new product introductions.

I know we repeatedly pointed out the KitchenAid suite, which is hugely successful, but you've all seen like the laundry tower, the UV on the laundry, we have some really, really good products where I feel very good about it. And that obviously helps us offsetting other challenges which you may have on the promotion environment. So we feel very good about the product introductions, and we will certainly not slow down.

The important thing, I think we highlighted this already in the last earnings call, despite the obvious challenges, we have not cut back our capital investments on products, period. We kept that. As a company, we're convinced our innovations are good. We will continue to feed the pipeline, and we have not cut back anything on capital investments on the product, and we have no intention to do so.

Okay. All right. That's very encouraging. And then as you think about the cost takeout initiatives that you've announced and the way that they're sort of positioned across the footprint. Can you talk a bit more about the opportunities to realize further efficiencies, how technology plays into that? And how we should think about ultimately where your sort of operational efficiencies can go over time?

Yes, Susan, let me maybe just try to simplify also what we put on certain slides. There's always ongoing cost takeout initiatives, either on the product redesign, which have a fairly quick turnaround. But also in the factories, we have put in a lot of investments about automization. We put in investments to drive more vertical integration. That's particularly related to the plastics and what we do with the Perrysburg facility.

But then on top of that, and that is -- I think these were the big announcements in Q1 and Q2, fairly sizable factory footprint decisions. That impacts Amana, where we basically reduce the overall volume and refocus the factory entirely on bottom mount refrigeration.

The second one was particularly related to the Argentina factory, which is a too expensive factory for us in that environment, and we basically consolidate that with our Brazil operations.

And the third element is what we announced in Mexico, where we have today essentially 2 refrigeration factories, and we consolidate in one kind of big factory. Obviously, we -- it's typical for these footprint moves. They don't immediately give you a return 1 quarter later because they -- typically we phase in and phase out.

May take anywhere between 6 to 12 months, but we have initiated them, and that would structurally drive a much better cost position. But the major benefit of this one is actually in 2027. It's just the lead time it takes until you fully capture these benefits. But these footprint moves are very significant and will help us sustain our best cost position in North America and South America.

If I can add, Marc, maybe you mentioned the role of tech. We're also investing significantly in IT infrastructure, whether it is behind our direct-to-consumer platforms, which we are globalizing across the business units in the various regions, which drives efficiencies in the way that we go to market as well as the enablement of AI for the transformation of our overall approach across the business.

Just adding one more comment. This is Juan Carlos. Just -- so I will combine the 2 questions. So product innovation and capital allocation that we're doing, it's going to be to drive consumer meaningful innovation that can drive the top line and margin expansion. At the same time, they will do automation and vertical integration to be able to drive the right cost to be able to sustain this. So they're basically to drive top line and cost.

Your next question comes from the line of Eric Bosshard from Cleveland Research.

Two things. First of all, just a quick follow-up. On SDA, sell-through in the U.S. in 2Q was 10% and global was up 15% to 20%. I guess I heard that right. Is that -- things like epic market share growth? Am I -- did I hear that right?

No, Eric, what I mentioned, this is Ludo, is we were up high teens across the globe, and this was true of the U.S. as well. The U.S. was 16% POS growth.

That's notably above the market.

Exactly. It does point to market share gains. We saw those in terms of stand mixers and the mixing segment, as well as in some of the new product areas, meaning espresso, which is a very dynamic industry in which we are gaining share. Blenders as well, we've been gaining share in.

Okay. And then secondly, Marc, I appreciate you had kind of 2/3 of the promo price increase in the June quarter. And so you'll have all of that in the third quarter. In addition, to the list price increase that's coming, in addition, to the builder price increase that's coming. And then you mentioned some incremental promotions that can be a little bit of an offset. I'm just curious, as we're now into -- excuse me, into 3Q, like how is this playing out?

And obviously, trying to get to the net impact of it. But how the consumers are responding to this pretty material incremental increase in price?

Yes, Eric. So first of all, you're absolutely correct. These are the big 3 elements of our pricing. Again, the promo increase from Q2, the list pricing 4% in July, and the buildup. These are the big building blocks. What I refer to in promotion is just a basic promotion policy, which we already executed in Q2.

We will participate when we think it drives a significant lift and a return on investment for us and the retailer. That is not a change policy, and we've demonstrated that in July 4. We only went 2 weeks on the promotion period as opposed to 3 weeks. And I think that basic policy is unchanged for Q3.

Above and beyond this one, is obviously, we're not making any future pricing announcements. That would first be public and then we can talk about it. But if we stick to the promotional discipline, these 3 pricing elements, that's what gives us a lot of confidence for pricing in Q3 and Q4.

Your next question comes from the line of Shaun Calnan from Bank of America.

So the price realization you're seeing is encouraging. But could you talk about what you're seeing from a mix standpoint? Are you starting to see trade down? And then are the new product launches enough to offset those mix headwinds at this point?

Yes. So I think, first of all, I think it's important to remind ourselves, we're still operating in North American environment, which is largely a replacement or distress market. That is just the simple reality. That is -- if you largely operate in replacement market, the overall volume or what some people refer to price elasticity is very limited. If a washer or a refrigerator breaks down, people buy it. What you do see, however, but this is nothing new. We experienced that in Q1 and Q2, that sometimes consumers stay on the price -- same price points, i.e., they kind of -- they don't want to spend more than $499 for a washer, and they stay to that price point, which is a slight mix down.

The offsetting element, which is more in our control are the new products, which give you a mix up. So I think with the new products, we can certainly offset the negative impact, which sometimes come when you have overall price increases on the replacement mix.

Okay. Great. And then I just had one on refunds. Are you seeing competitors hold on to IEEPA refunds? Or do you expect them to return those to their customers? And then just if there -- is there any impact from the changing 232 dynamics that would impact that decision?

Yes. I mean, obviously, I cannot speak for our competitors. I can only refer to what was publicly announced. And those competitors who gave more detailed statements on Q2, they largely recognized these benefits in Q2. That's what we've seen. So I would say, if at all, that would have been visible in Q2, so it's largely behind us. As you relate to the new tariffs, I don't -- particularly the 301 tariffs, I don't expect a major change in the tariff environment around us. I'll put it differently, the tariff expenses or costs which we had in Q2, we expect similar levels in Q3 and Q4, plus/minus.

Your next question comes from the line of Edward Magi from BNP Paribas.

So the first one, you held MDA LatAm margins steady for the guide. And my math would suggest that you might need to post second half margins potentially as high as 8% plus. So it would be helpful to hear about how you're viewing the sequential uplift from Q2 to Q3, and then for Q3 to Q4 as well, given the promotional environment you're seeing there.

Yes. And again, we typically don't give Q3 or Q4 specific margin guidance. But I think you -- particularly 2 big elements you have in the back half. First of all, as a very important reminder, our KitchenAid SDA business is a very seasonal business. So there's a lot coming Q3 and Q4. So by definition, and that has not changed.

We're basically having a step-up overall between Q1 and Q2 versus the second half in KitchenAid SDA profitability. The other element is North America. As I pointed out earlier, between Q1 and Q2, we had a very sizable step-up on the margin on the backlog pricing. And we see and we do expect similar improvement in Q3 and Q4 in North America based on pricing and the additional cost actions.

If I may add, I think the question is also directed at Lars. So we're taking pricing pretty significantly in Brazil right now, which is really where we are turning the tide from a margin standpoint. The rest of the continent has actually been performing really well.

So in Brazil, specifically, we're taking pricing, and we're doing that on the back of really strong brands and really strong new product introductions that happened earlier this year that are continuing to roll through Q3 and the earlier part of Q4.

So a little bit similar to the conversation for North America, you'll see pricing take hold progressively as we move through the quarter. It's already effective from a direct-to-consumer standpoint, but it was announced to be effective August 1 from a retail perspective.

So it's going to take a little bit of time to kind of seep through the quarter in Q3 and then expand fully into Q4. And then on the cost side, also a bit of a progression sequentially from Q2 to Q3 to Q4 as we take fixed cost and variable cost out of the overall P&L.

Thanks, Ludovic. And sorry Ed for misunderstanding your question. I thought you referred to the overall company as opposed to Latin America. I apologize.

No worries. Color on both segments is helpful either way. So I appreciate that. And then just as a brief follow-up, I'm curious if you could quantify the amount from the Brazilian tax tailwind in the quarter. I'm not sure if I had missed that on the call or anywhere else.

This is Roxanne. In terms of the Brazil tax, we did get a meaningful benefit as it relates to tax, which we have mentioned both in the presentation as well as on the script. I would say the net impact is roughly $14 million. We had some puts and takes, but overall, net would be around $14 million, 1-4.

Your next question comes from the line of Jeffrey Stevenson from Loop Capital.

It's been several months since the changes in the Section 232 valuation. And I wondered if the steady improvement in competitor pricing and a challenging residential backdrop through July gives you confidence that the industry has become more rational from a pricing and promotional standpoint moving forward?

Yes, Jeffrey, it's Marc. So first of all, you're correct, but 232 is now kind of -- the final change of 232 is now a couple of months in the market. So as such, we've seen stabilization. It's a very important thing, however, to note also what we did on pricing is not just tariff related. It's also related to inflation, which we have been facing over the last 2 or 3 years. So it's a compound effect on tariff and the base inflation costs.

I think what we're seeing right now is people pass on the real costs of the products to the market. And that's what we are doing. We have a real cost, and we pass it on to the market. If you call that rational environment, yes, that's what it is.

And I would also expect, keep also in mind that the cost for tariff for us are lower on a relative base than for our competitors. So put it differently, our competitors will feel the impact of tariffs significantly more than we do. But I can only speculate about their pricing and that's their job to do. But I would say overall as an industry in the long term, people are expected to reflect cost in the product pricing.

Understood. And then can you discuss the decision to consolidate regional distribution centers and return centers and what factors were considered in the 25% reduction that'll be closed or consolidated? And then on top of that, how we should think about the timing of the expected $60 million in annualized EBIT benefit?

Yes, Jeffrey. I mean, first of all, and this maybe more for a broader audience. Essentially, as a company, you have 3 type of distribution centers. You have a factory distribution center. You have this big regional distribution center. And then you have a local distribution centers.

I would say, by definition, we probably have the tightest net of local distribution center of anybody in the industry. And what you do when you make these local distribution decisions, you basically -- on one hand, you want to be close to the customer in a physical distance, but you also got to recognize the more distribution centers you have, you basically spread your inventory pretty thin, which doesn't help on availability.

So we're kind of dialing back in terms of still being very close physical to the customer, as you have before, 97% of our customers are within 100 miles. But with a reduction of a distribution center, it actually will help us our availability and at the same time, obviously, it will help the operating costs from local distribution centers.

So actually, that's what I call it a rebalancing. We still have a super, super well covered local distribution centers, but I think the outcome will be lower cost and better availability. I think that was the last question, which we had on the call. So first of all, I want to thank you all for participating in today's call.

Again, as a reminder, and hopefully, you heard that today, we actually feel pretty good about where we are for Q2. We had more incremental margin improvement between Q1 and Q2. Our pricing work, in particular in North America, sticks. We announced additional pricing also in Latin America. We talked a lot about new products, and we feel very good about the new products.

But we all recognize we still have a step up in front of us for Q3 and Q4. But hopefully you heard today, we feel kind of encouraged by what we see in Q2, and we will continue on the path of incremental margin improvement.

So thank you all for joining us, and have a wonderful day.

Ladies and gentlemen, that concludes today's conference call. You may now disconnect.

Good morning, and welcome to Whirlpool Corporation's First Quarter 2026 Earnings Call. Today's call is being recorded. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer; Roxanne Warner, our Chief Financial Officer; Juan Carlos Puente, our Executive President of North America and Global Strategic Sourcing; and Ludovic Beaufils, our Executive President of KitchenAid Small Appliances and Latin America. Our remarks track with a presentation available on the Investors section of our website at whirlpoolcorp.com.

Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements to assist you in better understanding Whirlpool Corporation's future expectations. Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K, 10-Q and other periodic reports. We also want to remind you that today's presentation includes non-GAAP measures outlined in further detail at the beginning of our earnings presentation. We believe these measures are important indicators in our operations as they exclude items that may not be indicative of our results from ongoing business operations. We also think the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operations.

Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for reconciliations of non-GAAP items to the most directly comparable GAAP measures. [Operator Instructions]

With that, I'll turn the call over to Marc.

Thanks, Scott, and good morning, everyone. During today's call, you will hear free message from us. First, we finished a tough quarter in our North American business. The month of March, which typically carries the quarter in North America, was exceptionally weak due to these 4 drivers, which I will discuss in further detail in the following slides. Second, we are taking decisive and bold actions to restore North American margins back to a healthy levels. We have issued the largest price increase in more than a decade that raised prices by more than 10%, and we're doubling down and accelerating our cost actions despite higher inflationary headwinds.

Third, our equity offering and a renewed revolver credit line, which we expect to finalize in Q2, puts our balance sheet in a strong position to weather this difficult industry cycle. Before we get into the numbers, I want to provide a bit of background about the macro environment in North America, not as an excuse, but as context for what happened in the second half of the first quarter.

Turning to Slide 7. We can see that consumer sentiment has dropped to its lowest level in 50 years. The consumer sentiment was already on a very low level by any historical standard, but the war in Iran amplified consumer concerns about the cost of living. As a direct result, a consumer sentiment index in the U.S. plunged reaching the lowest level on record in March. Now while our view is that consumer sentiment is unsustainably low and should rebound from here, these events clearly pressured our industry and particularly discretionary demand.

Turning to Slide 8, you can see the resulting impact on the U.S. appliance industry. The U.S. appliance industry demand declined 7.4% in the first quarter, with March being down 10%. This level of industry decline is similar to what we have observed during the global financial crisis and even higher than during other recessionary periods. Keep in mind that we are operating in an environment where the rest replacement demand drives more than 60% of the industry, and this part of the demand is relatively stable. So this gives you a sense about how dramatic the impact on discretionary demand was. While we do believe that the negative industry demand in March was somewhat of an outlier, we do not anticipate a full recovery and are now forecasting U.S. industry demand being down by 5% on a year basis.

Turning to Slide 9. I want to share a snapshot of industry pricing over the past 15 months. This picture represents an aggregate view of literally thousands of price points which we collect weekly. It is based on publicly available retail sellout data. While it may not be 100% accurate, it is, in our view, directionally correct. In 2025, the multiple changes in tariff policy, delays and on-the-water exemptions as well as the effect of inventory preloading by Asian competitors created significant volatility and promotion behavior. However, immediately after Black Friday, pricing improved slightly above pre-Black Friday levels.

While the price changes were still below the level needed to fully offset the accumulated inflation and cost of tariffs, it was a positive development in line with our expectation coming into the year. As you can clearly see in the small chart on the top right of the page, after the IEEPA ruling by the Supreme Court, promotion pricing reverted back in the following weeks. We believe the Supreme Court ruling, the broader skepticism about the durability of tariffs and the anticipation of refunds related to the tariff resulted in a resumption of an aggressive promotional environment. It is also obvious that price changes of 1% to 2%, as we've seen in February and March by the competition did not even remotely covered the cost of inflation and tariffs.

You can also see that after the price changes, which we announced on April 17, Whirlpool set out prices, as determined by our retail customers have moved up by 10% compared to January 2025. At the same time, the behavior from our competitors has shifted more favorably. The key development for U.S. appliance industry this quarter was the change in Section 232 tariffs which brought clarity and predictability to the tariff landscape. We will later discuss these changes in detail. But what might appear as a small change in the 232 tariff has significant and lasting ramifications of the entire industry. Essentially, every imported appliance into this country, irrespective of where it comes from, will have to pay a tariff of 25% on full product value. And in the case of China, even more. The combination of drop in consumer sentiment, decline of consumer demand and the irrational industry pricing created an almost perfect storm during this first quarter. But we are taking decisive and bold pricing and cost actions that we expect will bring our North American business back on its path towards healthy margins.

With that, let me hand it over to Roxanne, who will discuss the first quarter results in more detail.

Thanks, Marc. Turning to Slide 10. I will provide an overview of our first quarter results. As Marc mentioned, our results in the first quarter were negatively impacted by the ongoing macroeconomic and geopolitical events that have developed since late February. We delivered an ongoing EBIT margin of 1.3% and an ongoing earnings per share of negative $0.56. Our earnings per share, in particular, was negatively impacted by approximately $0.32 from the noncash loss associated with our minority interest in Beko Europe B.V.

Looking at our segment performance, MDA North America was severely impacted by a sharp decline in consumer sentiment and the costs associated with our inventory reduction actions. MDA Latin America margin was pressured by the intense promotional environment. This was partially offset by the gains associated with the DIFAL tax ruling in Brazil. Conversely, the SDA Global segment continued to perform exceptionally well. Our free cash flow was negative $896 million as the benefit from our inventory reduction efforts was more than offset by lower earnings. Finally, we returned cash to shareholders and paid a $0.90 dividend per share in the first quarter.

Turning to Slide 11, I will provide an overview of our first quarter margin walk. Price/mix unfavorably impacted margin by 275 basis points. This was driven by 2 key drivers. One, collapsing consumer sentiment further reduced discretionary demand and negative impacted mix. Two, the encouraging industry pricing progress we observed in the first few weeks of the year was heavily disrupted by the Supreme Court's IEEPA tariff ruling and the anticipation of refunds, which created further external volatility and the return of an intense promotional environment.

Our net cost was negatively impacted by volume decline and onetime costs associated with the planned inventory reduction, resulting in 175 basis points of margin contraction year-over-year. We executed our originally planned inventory reductions and executed incremental reductions due to the unexpected industry decline. Overall, we drove 20% year-over-year volume reduction. Raw materials unfavorably impacted margins by 50 basis points, driven by inflation of steel, base metals and resins. The current and projected steel costs are now putting us at the maximum pricing of our long-term steel agreements. We experienced a neutral impact from tariffs in the first quarter as the incremental cost from changes to Section 232 implemented in the second half of 2025 were offset by tariff recovery and mitigation actions.

Marketing & Technology was favorable 50 basis points versus prior year, driven by reduced transition costs and a pullback in spending as we saw consumer sentiment shifts. Currency was also favorable by 50 basis points, driven by the appreciation of the Mexican peso and Brazilian real. Lastly, transaction impacts were an unfavorable 50 basis points due to the noncash loss associated with our minority interest in Beko Europe B.V. It is important to note that based on the current carrying value of this investment, Whirlpool will no longer recognize any further losses from Beko Europe B.V.

Now I will turn the call over to Juan Carlos to review our MDA North America results.

Thanks, Roxanne. Turning to Slide 12, I will provide an overview of our first quarter results of our MDA North America segment. In the first quarter, net sales decreased 8% year-over-year to $2.2 billion. Consumer sentiment collapsed into record lows due to the war in Iran prevented the recovery of the volume loss during the winter storms and resulted in recession level industry contractions with discretionary demand down approximately 15%. The segment delivered breakeven performance with EBIT margins negatively impacted by the sharp decline in demand, higher-than-expected cost to reduce inventory and the return of an intense promotional environment after the Supreme Court IEEPA rule.

While we experienced high cost from the actions to reduce inventory levels and higher tariff costs year-over-year, these were partially offset by tariff recovery and mitigation actions. As over 3 years of accumulated inflation continues to pressure our business, we have announced the largest price increase in a decade in conjunction with acceleration of critical initiatives to drive cost reduction. We expect these aggressive actions to put MDA North America profitability back on track. We'll share more details of those actions shortly.

Now I'll turn it over to Ludo to review the MDA Latin America and SDA global results.

Thanks, Juan Carlos. Turning to Slide 13. I'll review the results for our MDA Latin America business. Excluding currency, net sales decreased approximately 4% year-over-year. This is the net impact of an aggressive promotional environment in the region and volume increases from a growing industry and share gains. Due to the promotional pressure, the segment's EBIT margin was 6%. This margin was supported by a favorable Brazil tax ruling and our ongoing cost takeout initiatives, which partially offset the unfavorable price/mix.

Turning to Slide 14, I'll review the results for our SDA global business. This business continues to perform exceptionally well, delivering approximately 10% net sales growth year-over-year, excluding currency. EBIT margins expanded an impressive 250 basis points year-over-year to 21%, driven by continued growth in our direct-to-consumer business, solid execution of cost takeout initiatives and some marketing investment timing changes versus prior year. We are proud to celebrate the sixth consecutive quarter of year-over-year revenue growth, clearly underscoring the strength of our product portfolio and our value creation strategy.

On Slide 15, we showcase a few exciting new products that we're bringing to the market this year. We're proud to bring meaningful consumer-centric innovation to the stand mixer while maintaining our iconic design and heritage. The new Artisan Plus stand mixer is now featuring an integrated bold light and precise speed control. In our compact fully automatic espresso machine with iced coffee gives consumers the option to brew at a lower temperature, while also delivering a space-saving design that fits effortlessly into many kitchens.

Now I will turn the call back over to Juan Carlos to review the critical actions we are accelerating to recover profitability in MDA North America.

Thanks, Ludo. Turning to Slide 17, I'll review some of our bold actions to restore MDA North America margins. On April 17, we announced the largest price increase in more than a decade. This price change is being executed in 2 steps. First, we executed a promotional price increase, which is already in effect of more than 10% relative to the first quarter prices. This is the most impactful change and is expected to start driving price/mix improvements in Q2, ramping up throughout the year.

Secondly, we announced a lease price increase effective on July 9. The second wave represented an additional price increase of approximately 4%. This multistep plan is designed to offset the cost inflation accumulated over the last 3 years that has not yet been reflected in prices, the anticipated cost inflation in 2026 and some residual impact of tariffs. In addition to these pricing actions, we will continue to deliver product innovation and expand our mass premium and premium product offerings. The 30% incremental flooring gain on the back of the record year of product launches in 2025 is largely installed. And we are seeing the results of KitchenAid major appliances continue to deliver strong sell-through performance year-over-year despite the softer industry. Our robust innovation pipeline was further validated by the outstanding award winning performance at KBIS, where Whirlpool Corporation secured an impressive 23 awards.

Turning to Slide 18. I will highlight the successful launch of our Whirlpool branded UV laundry tower, which we presented in our last earnings call. The national rollout of this product featuring the industry-first UV cleaning technology that reduces bacteria in the wash while keeping Fabric Care in mind has been exceptionally well received and is exceeding expectations. This innovation is driving rapid share gains, capturing approximately 5 points within weeks and increasing our balance of sales with trade partners who have floored the unit. This confirms the competitive advantage of our game changer, UV clean technology.

Turning to Slide 19. I'm pleased to showcase the new KitchenAid intelligent wall oven, which earned the prestigious Best of Show Award, the highest honor at KBIS. This new wall oven is one of the many products available in our new KitchenAid suite, which began shipping late last year. This product allows consumers to experience cooking through a new lens with the intelligent cooking camera that identifies food, monitors [ toners ] and remembers your preference for your favorite recipes. We continue to see strong sell out through our KitchenAid market share gains to trend towards the highest level in over the decade.

Turning to Slide 20. I'll highlight exciting innovation coming to our InSinkErator business. The new LEDefense Odor Fighting Sink Flange features the UV-free LED light that kills 99% of common germs include an odor causing bacteria. These innovation features addresses one of the biggest consumer pain points of bacteria order. This is yet another product that received recognitions at KBIS this year and as the next-door neighbor to the dishwasher continues to position us well for the eventual housing recovery.

Turning to Slide 21. Let me provide an update on the initiatives we are accelerating to bring our business back on track. As we navigate the current macro pressures, we maintain our commitment to deliver our $150 million in cost take out in 2026, which will be fundamentally supported by our ongoing design to value engineering efforts. Given our current EBITDA margins, we're taking decisive structural actions across several key levers to accelerate our cost actions. First, we are heavily leaning into the vertical integration, automation and the optimization of our manufacturing and logistics footprint.

As part of these initiatives, we announced 3 key products: one, our new strategic investment in Perrysburg, Ohio. Two, the ongoing modernization of our Amana, Iowa plant; three, shifting production from Pilar Argentina to Rio Claro Brazil. Together, this footprint and integration moves are expected to unlock approximately $45 million in savings in 2026, while significantly improving our product quality, speed of innovation and overall supply chain resiliency. Additionally, as we shared previously, we are renewing our strategic sourcing initiatives. We have already completed the first phase of this project, and we're making good progress on the second phase. We expect to capture roughly $15 million in savings in 2026.

Finally, we're introducing a new measure which encompass targeted fixed cost actions within our corporate center. We expect to generate approximately $20 million in savings, which we will plan to share more details about it in the near future. Collectively, these actions will have a carryover benefit into 2027, ensuring that we are actively managing the element with our control to offset external headwinds and restore our profitability.

Turning to Slide 22. Let me detail the accelerating of our vertical integration and how we significantly strength our U.S. manufacturing footprint. We recently announced that we are making a $60 million investment in our new state-of-the-art production facility in Perrysburg, Ohio. This represents our 11th factory in the U.S. and our sixth in the state of Ohio, reinforcing the legacy that we are incredibly proud of, we started in America and we stayed in America for over 100 years. The strategic investments will drive greater efficiency and is expected to deliver approximately $30 million in annualized EBIT benefits.

Turning to Slide 23. We are executing critical factory footprint changes to unlock greater operational efficiencies within our regional manufacturing network. First, in Amana, Iowa, we are undergoing a multiyear modernization effort. This modernization will refocus our manufacturing of bottom-mount refrigeration and optimize our parts production and sub-assemblies, generating an expected annualized EBIT benefit of approximately $70 million. We're also optimizing our Latin America operations by shifting our front load washer production from Argentina to our Rio Claro facility in Brazil. This strategic shift drives valuable manufacturing cost efficiencies and logistic cost optimization, which we expect to deliver an additional $20 million in an annualized EBIT benefits.

Turning to Slide 24. Let me provide an update on Section 232 tariffs. While the Supreme Court overturned IEEPA tariffs in late February, the administration took significant actions in early April to strength Section 232 steel tariffs on home appliances. The updated 232 framework represents a significant win for the U.S. manufacturing and lasting structure advantage for Whirlpool. As a reminder, Section 232 steel tariffs were first implemented in 2018 and have proven their durability by remaining in effect throughout multiple administrations.

While home appliances were officially covered under the framework in the mid-2025, the recent updates in April have increased the overall tariff rate on Home Appliances and greatly simplify both compliance and enforcement. Because we proudly manufacture the vast majority of our products domestically and continue to invest in domestic manufacturing, this trade policy strongly supports our position. We estimate that a 25% tariff impact on our competitors will now be between 10% to 15% of our competitors' total U.S. major appliance net sales. By contrast, the impact of our MDA North America business is estimated to only be about 5%. Ultimately, these changes bring much needed predictability to the industry and deeply strengthen our competitive advantage as by far the largest domestic appliance producer.

Now I will turn the call back over to Roxanne to review our revised expectations for 2026.

Thanks, Juan Carlos. Turning to Slide 26. I will review our updated guidance for 2026. Given the rapid deterioration of the macro environment since late February, we have revised our expectations for our 2026 results. On a like-for-like basis, we expect revenue growth of approximately 1.5% in 2026 due to our revised expectations for the North American industry. Even though the industry has seen substantial degradation, our new product launches are expected to continue delivering growth in MDA North America.

We expect our MDA Latin America business to regain momentum and expect continued strength in our SDA Global business. On a like-for-like basis, we expect approximately 70 basis points of ongoing EBIT margin contraction to a full year EBIT margin of approximately 4%. Free cash flow is expected to deliver more than $300 million or approximately 2% of net sales, driven by significant structural inventory optimization. We expect full year ongoing earnings per share of $3 to $3.50. This includes approximately $1 impact due to the recent equity offering alongside an additional $1 impact due to an adjusted effective tax rate of approximately 25%, which is an increase compared to 2025.

Turning to Slide 27, we show the drivers supporting our 2026 ongoing EBIT margin guidance. We have updated our expectation of price/mix to 150 basis points reflecting the current impact of collapsed consumer sentiment, offset by the impact of our bold pricing actions announced in April. We expect to substantially improve price/mix and as we progress through the year with the benefits starting in May and ramping throughout the year. Net cost take out reflects the expectation of delivering more than $150 million supported by our accelerated cost actions.

While we have long-term steel contracts in place, the current and projected costs are putting us essentially at the maximum pricing of those contracts. This has a minor impact to our full year RMI expectations. However, combined with the inflation of base metals and resins, we have updated our expectations to approximately 75 basis points of negative impact from raw materials. We expect approximately 175 basis points of negative impact from the tariff announced in 2025 and updated in April 2026. We expect the benefits seen in Q1 from the tariff recovery and mitigation actions to be more than offset by additional tariff costs due to the Section 232 tariff changes announced in April. It is important to note that these impacts represent currently announced tariffs and do not factor in any future or potential changes in trade policy. Our expectations for marketing and technology currency and transaction impacts remain unchanged.

Turning to Slide 28, I will review our segment guidance. Starting with industry demand, we expect the global industry to be down approximately 3% in 2026. In North America, given the drastic decline already seen in Q1 and the anticipated prolonged inflationary environment, we now expect full year industry demand to decline by approximately 5%. Our industry expectations for MDA Latin America and SDA Global remain unchanged. For MDA North America, we now expect to deliver a full year EBIT margin of approximately 4%. The bold pricing actions we've taken and accelerated cost take out initiatives are expected to drive profitability recovery in MDA North America. Margin expectations for MDA Latin America and SDA Global remain unchanged.

Turning to Slide 29. I will provide the drivers of our free cash flow guidance. We have updated our cash earnings and other operating accounts, consistent with full year EBIT guidance. We have not changed our expectations for capital expenditures and continue to focus on delivering product excellence and investing in our U.S. manufacturing footprint. We have taken necessary actions to optimize our inventory and are updating our expectations to improve working capital by approximately $150 million to support cash generation in 2026. As seen in our first quarter results, our working capital initiatives are off to a very strong start and we expect these structural changes to improve our day-to-day inventory levels. Our expectations for restructuring cash outlays related to our manufacturing and logistics footprint optimization efforts are unchanged. Overall, we expect to deliver free cash flow of more than $300 million or approximately 2% of net sales.

Turning to Slide 30. I will review our capital allocation priorities, which have been updated to reflect the current business environment. Investing in organic growth through product innovation remains critical to our business, and this will continue to be one of our top priorities. We will continue to invest in product innovation, digital transformation and cost efficiency projects with approximately $400 million of capital expenditure expected this year. Secondly, we are committed to reducing our debt levels now more than ever. We expect to pay down more than $900 million of debt in 2026, continuing our commitment to deleverage.

Lastly, after careful consideration with our focus on ensuring financial flexibility during this challenging operating environment, we have made the prudent decision to pause our quarterly dividend starting in the second quarter. This decision is critical to ensure we create the capacity on our balance sheet to pay down debt and fund organic growth.

Turning to Slide 31. I will review how we are taking additional actions to manage our debt maturities and ensure liquidity in an uncertain macro environment. We recently executed a strategic equity offering that successfully raised approximately $1.1 billion in capital. The use of these proceeds was focused on debt paydown and accelerating our vertical integration and automation efforts. The proceeds were used as expected. We paid down more than $900 million in debt and began to invest in vertical integration with the acquisition of our Perrysburg, Ohio facility. We are in the process of moving to an asset-based lending facility.

As we transition, we entered into an amendment to our existing credit facility reducing our available line of credit from $3.5 billion to approximately $2.25 billion effective in May. This amendment provides us with a valuable near-term flexibility and ample borrowing capacity. We have strong lender support on the asset-based lending facility and are tracking well to closing the next credit facility over the coming weeks. These decisive actions demonstrate our continued focus on debt paydown as we work to drive our long-term debt below $5 billion.

Now I will turn the call back to Marc for closing remarks.

Thanks, Roxanne. Turning to Slide 32. Let me summarize what you heard today. As we discussed, our first quarter results were heavily impacted by severe external volatility and onetime events. The sudden macro pressures from war in Iran, resulting plunge in consumer sentiment and the disruptions to industry demand and pricing all masked the underlying operational progress we have made.

However, we're actively managing what is within our control. We have announced significant pricing and structural cost actions that are firmly in place to restore profitability to our MDA North America business. By driving over $150 million in cost takeout initiatives and executing our largest price increase in the decade, we're aggressively addressing our margin pressures. More importantly, our ongoing U.S. footprint optimization and the recent Section 232 tariff update meaningfully strengthened our competitive advantage as a domestic producer. Because we probably built approximately 80% of the products we sell in the U.S. here in America, we're structurally positioned to win in this new tariff landscape.

Additionally, our SDA Global business continues to perform exceptionally well, remaining a bright spot in our portfolio, consistently delivering revenue growth and margin expansion. Whether it is in small appliances or our major domestic categories, we continue to hold a leading position supported by our portfolio of iconic brands and innovative products. Looking further ahead, we know the U.S. housing market trough will be over at one point, and the March read of housing starts may be an early indication of a more positive trend. The eventual tailwind from an inevitable recovery will be strongly catalyzed by our leading established position in builder channel as well as the strength of our InSinkErator business.

Now we will end our formal remarks and open it up for questions.

[Operator Instructions] Your first question comes from the line of Michael Rehaut from JPMorgan.

I want to take a step back and just kind of -- my question is really just on the consumer, and you highlighted the all-time low in confidence impacting results. So far this earnings season, we've heard from other building product companies where volumes are down, but not to the extent that we're seeing in appliances and many have kind of reported that while the consumer confidence is shaky, demand trends have been somewhat more stable, perhaps than what you've seen in your own industry. So I was wondering if you could kind of contrast what the drivers are that maybe has created that greater amount of volatility in appliances as you see it from the consumer's perspective compared to other products like power tools, flooring, paint, plumbing, et cetera.

Yes. So Mike, obviously, I mean, just to repeat the numbers, we saw minus 7.4% industry demand in Q1, of which March was minus 10%. So that is even in our industry, as we pointed out a very, very unusual low level. I mean, that's why we pointed. The last time you've seen minus 10% was during the global financial crisis. I think one of the key elements which makes our category may be slightly different for other categories, at the end of the day, for the majority of U.S. households, appliances or the purchase of an appliance are a significant portion of our disposable income. So ultimately, it's a decision against the confidence the consumer has about the financial future. So it's just a big ticket item. It's not a $50 purchase.

And that, I think, explains a little bit what we've been seen right now in Q1. And while we're just a little bit more anecdotes, one of the strongest businesses which we had in Q1 was actually our spare parts and repair business, which just as an indicator that even consumers are holding back, replacing products and rather repairing it. We've seen that also in [ 28 ]. Now the flip side is consumer confidence is on a 50-year low, but we've seen in other phases, consumer confidence actually moves pretty fast. And I wouldn't expect that level of confidence, but also that level of industry demand being that much down for the rest of the year.

So we do anticipate a recovery. But at the end of the first 3 months already took industry so much down, no matter how you do the math, if you anticipate kind of a more flattish environment going forward, that's why we ended at a minus 5%. So I do consider and I agree with you, March was probably an exceptionally low outlier, which we didn't expect. Will that be the same going forward? No, but it's not going to be an immediate recovery for consumer environment.

Great. And I guess secondly, obviously, big price increases by yourself, and it looks like from Slide 9, the industry as well in the most recent couple of weeks. How are you thinking about second quarter EBIT margins for North America? And if your assumptions hold, what are you thinking about the trajectory for the back half as well?

So Michael, as you know, we're not giving specific Q2 margin guidance. But let me give you a little bit broader perspective on the pricing and what we're seeing and how it flows through our bottom line. So first of all, and I want to refer to a slide which we presented, this is the biggest price increase. I think we'll refer to in a decade. Honestly, 3 decades in the company, I have not seen that level of price increase. Keep in mind, there's basically essentially 3 components of that price increase. One, a very significant promotional price MAP or PMAP increase of more than 10%. That's already out there, and you see that already reflected in the retailer pricing towards the consumer.

Two, we significantly reduced our participation in promotions. So for example, July 4, we're going 2 weeks as opposed to 3 weeks. And we're not participating in all house promotions. And three, we have a list price increase also kicking in July on the vast majority of products. So it's kind of a multi-tiered approach. I would say the first 2 weeks of what we've seen in consumer visible prices have been very encouraging. So you could use the term first 2 weeks, yes, the pricing is sticking. Needless to say, that is key to everything going forward on the EBIT margin. And if that holds, then we will be in a good place.

Now keep in mind also, and this explains a little bit Q1 and then you should also anticipate in Q2, but chart shows you consumer pricing. That is not exactly how it exactly immediately flows to our bottom line. What I'm referring to, for example, take Q1. In Q1, you still pay the former promotional investment on Q4 because it's a delayed or trailing effect. So even though the April pricing consumer starts, you're still partially paying for the March promotions out there. So there's a little delay effect, which also will flow through Q2. But again, if the pricing holds, as we've seen in the 2 weeks, I think you will absolutely see the gradual recovery of our EBIT margin as we kind of pretty much laid it out.

Your next question comes from the line of David MacGregor from Longbow Research.

My first question was just on the guidance. And I guess a few parts to this, but can you explain why you're calling out the improving price environment at the same time taking down your full year price/mix guidance? And would you tell us how much of the price improvement you're including revised guidance? It looks like you've got kind of partial inclusion with the reduced PMAPs, but maybe none of the July increase, and then how much are you specifically assuming for mix? And then I have a follow-up.

Yes. So David, first of all, the full year number, which you've seen on Page 27, keep in mind, we basically have 3 months of negative pricing. And you saw that in the earlier pricing margin walk. So you first have to overcompensate on a full year base of what you already lost in Q1. So put it differently, yes, on a full year basis, it looks like it's kind of 25 points down actually on the Q2 to Q4 point, it's significantly up. Did we factor in the full amount of a price increase? No, which also means the success of a stickiness of price will determine a lot, but we took, of course, there's a certain assumption, which we took into account here, but maybe not the full amount. But let's see how these things develop.

The big uncertainty, and this is why we were still a little bit cautious, and you alluded to this one is mix. And let me explain that a little bit because that's probably on everybody's minds. I know some people will ask or may ask about what happens to price elasticity. Actually, in all previous years, we've not seen so much an impact on consumer price elasticity. For a simple reason, last time consumer bought an appliance was 10 years ago, by and large, the prices are very similar. So we don't see the big elasticity from a pure demand, particularly in replacement market.

What you do see, however, that in particular in a distressed environment, that consumers enter the store with a budget in their mind. So what I mean is they have a budget, let's say $600, and they basically going to stick by that price point. So what you see as opposed to a product with used to cost $599 is now $649, they stick to the $599 price point. What it means is for us a mix down to kind of an SKU. So we saw in our circumstances, not necessarily impact on volume of demand, but you got to manage the mix very carefully. And that's what we -- but obviously, that's the kind of biggest uncertainty. That's why we didn't fully factor in what happens to mix, how much can we compensate? How much can we mitigate?

We have tools in place, in particular with our new products to manage the mix in the right direction. But that is really the consumer uncertainty about what happens to mix when you go out in an environment which from a consumer perspective is distressed.

Got it. Okay. Just as a follow-up, I guess this is maybe a higher-level question, but can you just update us on the path from where we are now to your 9% target for EBIT margins longer term? How does that 500 basis point bridge look in terms of price/mix, net cost, volume leverage, RMI, the framework you typically employ?

Yes. I mean, David, the first big step is actually what will need to happen in '26. I mean, as you can -- obviously -- and I know you're probably already did the math, that guidance which we've given on 4% this year implies that basically you have an exit rate, which is very different from where we are today. And without getting into the details of quarter-by-quarter margin, and you're basically talking about an exit rate of, whatever, 6% plus for North America. That is the fundamental step on everything. So the question on your 9% starts with exit rate of Q4 this year.

The pricing actions together with the cost actions will put us on the right trajectory. On the cost actions and a lot of things which we talk today about, obviously, as you can imagine, have a lot of carryover benefits. So all the manufacturing footprints, the vertical integration, the numbers for '26, as you could tell, are yes, they're okay, they give some benefits, but the real benefits start '27 going forward. That's when you see a lot of these benefits. So we carry the exit rate into next year. We have additional cost actions. That puts us on a path towards the 9%. I'm not saying that's a '27 number, but it puts us on the right path.

Your next question comes from the line of Sam Darkatsh from Raymond James.

So 2 questions. First off, around the RMI guide, I think you raised it by about $100 million versus prior. Does that contemplate current market prices for PVC and resin and base metals? Or does that contemplate some give back from current market prices in the second half of the year? And then I've got a follow-up.

Sam, the short answer, it does. Let me give you a little bit of context. So as you know, you know it very well. Our #1 purchase product is steel, to Roxanne's earlier point, we're kind of getting to a cap of our loan agreements. We were hoping maybe a little bit below the cap, but that's fully factored in, but it's not volatile going forward for us.

On the resins, it does not reflect the current spot because the current spot and the way how we buy it is still reasonably okay, but it anticipates that Q3 and Q4, we have some headwinds on our plastic components. It just ultimately results of what we're seeing on oil prices. There is another element which may be on a relative case, maybe a little bit more favorable for North America as opposed to Asia. I think there might be also some supply constraints in plastics, in particular, for Asia, which ultimately will also drive prices on plastics.

But they do, the second half does contemplate like current market prices for resin and oil throughout the year, and then it just hits you in the back half, just clarifying that.

Yes, it implies an increase of plastic prices in Q3, Q4 versus where we are today.

Got you. And then my follow-up, you cut out a lot of production, obviously, you get the inventories in better shape during the first quarter. The rest of the year, are you anticipating production and shipments to largely match or is there -- are there more production cuts to come?

Yes. So Sam, first of all, to clarify Q1, we already planned, and we alluded to this one in January, that we want to bring down inventory to the right levels. Obviously, with industry demand being what it is, we had to cut even more production than we ever had in mind. That cost us in the quarter around $60 million. So it was massive. But the good news is right now, inventories in North America are what I would call on a really good level. They're on a healthy, sustainable level.

Now having said that, we are anticipating also on a full year basis that the industry demand will not fully recover. So also going forward, we will produce less than we, for example, produced last year. But we know that now we can adjust accordingly. So there's not going to be a big onetime reduction in inventory, but it's just more we want to keep production in line with what we're seeing in the industry demand.

Your next question comes from the line of Mike Dahl from RBC Capital Markets.

I wanted to ask first about tariff dynamics of. Two parts. First is you didn't record a material tariff impact. And in first quarter and you're still lapping the tariffs from last year. So curious if there was any booking of refunds or anything, another onetime in nature there? And then when you think about the net tariff impact going up for the full year kind of despite that. Can you just help us parse out like what the -- like obviously, your competitors are more impacted by 232, but what your net puts and takes are around kind of the current guide? And what's contemplated and how much is specific to 232?

So Mike, so let me first talk about how it impacts us and then maybe broader on this 232 tariff, and I'll read into this one. So first of all, as you know, we as a company, we pay 3 different types of tariffs. That's the 232, the 301 in the past was the IEEPA and now to some extent 122. So it's always going to be a stacked layer of this one. In Q1, we had a number of favorable tariff mitigation actions. That's a combination of post-summary corrections. It's on tariff claim sales and tariff refunds on the IEEPA piece, not on the 301 or 232. So in Q1, there was actually a pretty neutral guide, or put it differently, it pretty much helped offsetting the cost of inventory reductions. So it's a wash.

On a full year basis, we do anticipate, and that's now the effect of a 232 and also with 122 changes, but the tariff costs on a full year basis go up 0.5 point. That's fully factored in. Now again, that's from today's environment, if something changes, when something will change, but that's pretty much we expect on a full year base. But keep in mind, in every given quarter, you may have ins and outs, that depends on shipment patterns, that depends on what happens on the 3 different tariffs. But on -- at the current state, if the tariffs not stays stable, I think 1.275% is pretty -- that's pretty much what you should expect.

Now the broader comment I want to make on 232, Juan Carlos in his comments earlier already alluded to this one. I know we may feel to be outside like this is a small change of 232. It is actually big in the ramifications of our industry. And let me just explain it once again. Before it was fairly complicated, but the appliances for the first time were included in 232 last year in April. The way how it was set up with declared steel value and declared weight was very complicated. And I would say, left many doors open for maybe not a full declaration of real cost.

What changed now is a flat rate of 25% against the full declared product value. That brings a lot of stability and clarity to the equation because the border authorities, which are very competent, they have a lot of history and understanding of full product declaration. So the ability to kind of circumvent that are very limited. And 25% on every single imported appliance into the country is massive. Nobody can escape that. So -- and of course, with our domestic production footprint, that what I would call is finally the environment which allows a level playing field. Honestly, we've been waiting for this one essentially for a year. It's now as of April 6, finally in place. And I personally believe it will drive a lot of positive changes for us.

That's helpful. My second question is more demand related and specific to North America MDA. The understanding March was kind of an acute weakness. What are the trends that you've seen since March and April and midway through May, especially as you and others have tried to implement price, because I know you're saying that you're not assuming full recovery from a demand standpoint, but it still seems like to get to your full year revenue guide, volume trends in addition to price/mix has to improve through the year. And it also seems to imply still some share gain while you are on charts kind of show you trying to take at least at this point in time, more price than your peers. So I'm just hoping to get a better walk for kind of the more recent dynamics you've seen and how you're envisioning the balance of the year?

Yes. So Michael, obviously, Q1 was really rough from an industry demand in March in particular, that March was just a fall off the cliff on demand. April slightly improved, but still a negative trajectory. And honestly, that's pretty much what we expect. It's -- as long as the consumer sentiment is that much down, I don't think you will see strong market demand patterns, but not to the level of what we've seen in March. March was just a shock to the system. So April is slightly improving. What we do see, again, the basic trends of business replacement market continues, what do we see is still mix being under pressure. Consumers are budget constrained. It doesn't impact necessarily the volume of appliance sales sold, but it impacts the mix. That's what we've seen in Q1.

That's what we're also seeing in April, and that relates back to my comments is we do go very aggressively on the overall pricing, but we've got to manage mix in the meantime. So that's a market trend, which I think you will see pretty much Q2 and Q3, i.e., volumes being soft to slightly negative and mix being under pressure.

Your next question comes from the line of Eric Bosshard from Cleveland Research.

Just a clarification of 2 things. One, the March and April, the demand -- this is an industry shipments, is that correct?

That is correct, Eric. Maybe to elaborate on this -- keep on going.

Yes. I was just going to ask. I'm curious on sell-through. Is the sell-through what you're seeing at retail down 10% in March and a similar level in April? Or is this just a shipment issue?

Yes. So Eric, you're pointing out a good point. So what I'm referring to is industry shipment into the trade. In Q1, and of course, we don't have industry inventory levels. We know our own product inventory levels with retailers. So I would say, estimate in the 7.4% down, but probably about 0.5 point to 1 point of inventory reduction of trade included in there, but not more. But that's just an estimate from our side.

I think I would say on our products, because we don't have industry sellout data. Our products in Q1 actually held reasonably good ground. So I would say the last 13 weeks what we've seen is pretty much a flat to slightly down sellout, so a little bit better when we sell in. And that's what we continue to see. Again, that relates back -- we feel good about our product range. Our products are selling. And to what Juan Carlos showed earlier, the KitchenAid products, in that market is still growing at double-digit rates. So we know our new products are selling, but the sentiment is just weak overall.

Okay. And so the dramatic change, the impact from the war is on the sell-in and the sellout has not changed meaningfully. Is that your point?

Well, just I need to clarify on our products. But even in March for sellout was there were 1 or 2 weeks in the overall sellout, which were really down. Our products right now overall in the sellout a little bit better than what we see from a sell-in from a broader market. But we now need to see what's going forward. But I mean, again, March also in sellout was not the strongest.

And then secondly, just to make sure I understand that you talked through the strategy with promotions and last weeks that you're going to participate. And all of that is then reflected in the industry down 5%. Is that -- and I know elasticity, this is not an industry that responds a lot to price, so price is not that important as what I've heard you say. But in terms of your expectation on volume, that's all captured in this industry now down 5% versus 0. That's the expectation of these changes. Is that correct?

That is correct. And just again, it's in a market which is strong replacement-driven, again, more than 60%, it just does not make sense to have promotions on July 4, which are 3 weeks long. You're not going to increase market demand. You pull forward at best but you're not going to change market demand. That's but our decision, that retailers make their own decision. Our decision is we will only support on July 4, 2 weeks and not 3 weeks. And we're also not going to promote in every -- or participate in every single house promotion. Again, retailers may make their own independent decisions. That's what I'm referring to is what we are supporting because in such a market, you will not increase demand by excessive promotions.

Your next question comes from the line of Rafe Jadrosich from Bank of America.

This is Shaun Calnan on for Rafe. Just first one, you guys are raising price a little more than your competitors despite the higher tariff impact for them. Are you expecting them to have to catch up on the price increases? And then with that in mind, what are you guys expecting for share gains this year?

Yes. So Shaun, first of all, I really want to be clear also to the audience, we're raising price not just because of tariffs. We have 3 years of pent-up of inflation, which we have never reflected. The entire industry has not reflected that. Many people could argue that you have 20 years of inflation which have never been passed on consumer. So we're passing on 3 years of pent-up inflation, which, at one point, we just have to pass on to consumers in addition to tariffs. Now that mix of inflation and tariff maybe different for every competitors and they make their own decision. We know what we have to do because of our cost base. We will reflect the cost of our products in the consumer prices, and that's -- and your question about are we slightly higher than competitors? It's more -- yes, we also have a lot of new products, which I think deserve a higher value.

Okay. That makes sense. And then on the 10% to 15% impact from 232 to competitors. How does that compare to what you guys thought the IEEPA impact was?

First of all, the IEEPA impact, I think there was a lot of uncertainty in terms of how much was really paid and how much flow through. For me, the more relevant point is, it's very stable. It's hard to circumvent and bypass. There is no country hopping, which will happen because of different rates. So nominally, it's probably slightly higher, but in terms of real effect, I think you could call that tariff has gripped, and I think that's a very, very different landscape than what we've seen a year ago, very different.

Your next question comes from the line of Susan Maklari from Goldman Sachs.

My first question is on the strength that you actually saw in SDA, which seems to be quite contrary to what is going on with the consumer and your overall comments on demand. Can you talk about how much of that strength is driven by your product specifically in the investments in innovation versus the exposure that you have there, the price point? And how you're thinking about the sustainability of that given the environment?

Susan, this is Ludo. Thanks for the question. So in terms of the overall industry, we have not observed as much of a compression in consumer demand in SDA as what we just discussed in MDA, be it in North America or in other regions. It's probably a couple of reasons for that. And actually, some of you alluded to it, we're looking at lower ticket items and so the consumer resilience is a little stronger. In that context, we're gaining share. And I think that's based on the fact that we're selling at a more premium prices where the consumer also has more resilience, number one.

Number two, we're doing really well with our new products. So whether that's the carryover effect from launches last year in blenders, for example, or just now the effects that are starting to show up in terms of stand mixer innovation and compact espresso, we're seeing just really strong numbers all around. So really pleased with how that's shaken out so far. We're going to continue to monitor the industry going forward. And -- but with the strategy we have and the launches we've done so far, we're pretty upbeat about the rest of the year.

Okay. That's helpful. And turning to the dividend. Can you talk a bit more about the decision to suspend that? What needs to happen to perhaps start to bring that back in? And then just more broadly, your thoughts on the current capital structure post the offering. And I know you talked about that path to deleveraging. But can you just give us a bit more color on how you're thinking about the future of the capital structure and what that will mean for uses of cash?

So Susan, first of all, to clarify the dividend decisions are made by our Board. But as the CEO, yes, to suspend the dividend is a very, very painful decision. I mean just what it is. And certainly, it's not something which I want to keep for very -- many quarters in place. So we would like to resume a dividend as quickly as possible, but it's -- clearly, it's a Board decision. What has to be true is, basically, we need to have a better ongoing operating margin, and we want to continue to pay down our debt. That's basically what has to be true before we resume the dividend, but it's really a reflection of we want to pay down our debt this year. You saw earlier, $900 million, that's massive.

And at the same time, we want to continue to invest in our future in products, but we did not want to cut back our capital investments. That's why we took the difficult decision. It's the right decision with capital allocation, and we will reassess as the operating margins will improve. But again, it's ultimately a Board decision.

Susan, to tap into your question related to overall what we would do with capital allocation post the equity offering. We do have, at this time, ample liquidity to operate the business in the uncertain environment. As you do know, we have the $3.5 billion unsecured revolver. At the end of Q1, we moved to a $2.25 billion unsecured revolver as part of our covenant amendment.

With that revolver, we, as I said, have ample liquidity. But with that said, given the uncertain environment that Marc just touched on, we will continue to look at all opportunities to further bolster our balance sheet, whether it be continuing to evaluate asset sales, as we mentioned in the last earnings call and then also continuing to look at financial alternatives like tapping in to the capital market as needed with a focus on ensuring that our net debt leverage continues to improve.

Your final question comes from the line of Kyle Menges from Citi.

This is Randy on for Kyle. Yes, I was just hoping you could talk a little bit about what you're seeing in the promotional environment in Latin America. And I guess your expectations around how you'd expect pricing behavior to shape up in that market from here?

Yes. This is Ludo. So in terms of our -- the promotional environment in Latin America, first of all, the general background is one of pretty significant growth in the market at this point. We're seeing growth in Brazil. We're also seeing growth in a large number of markets around that America. With that said, we're cautious, I would say with the outlook for the rest of the year, considering the political environment, a number of elections coming up, just general volatility in the region.

I think the promotional environment has been particularly intense in Brazil lately, with foreign competitors, in particular, and imports being pretty aggressive on the back of a strong real. So we're responding to this with product launches in -- particularly in the premium side of the market where we've got a nice lineup coming through that's being very successful right now, and specifically in refrigeration and laundry, number one.

And then number two, we have a lot of cost actions accelerating in order to provide competitiveness in this particular market, whether it's vertical integration, whether it's the Rio Claro production facility expansion to take in the front load volume that was previously built in our Argentina plant. So we're confident we're being the competitiveness that will enable us to be successful in a highly competitive environment.

Ladies and gentlemen, that concludes -- please go ahead.

I think that pretty much concludes today's questions and the earnings call. So first of all, I appreciate everybody joining. I'm not going to repeat all the commentary which were made, but you obviously saw we had a challenge in Q1, which was driven by a very, very rough environment in North America. But even more importantly, we took right bold and decisive actions. And we're talking about actions, which are not just transactions or hope we're already in place. And you've seen also in the pricing chart, we start seeing the effect of this one. So yes, the Q1 was challenging, but the actions are in place, and we have 100% focused on reverting the current profitability trends in North America, and we have full confidence behind that.

So thanks for joining me, and we will talk to you each other again in July. Thanks.

Ladies and gentlemen, that concludes today's conference call. You may now disconnect.

So I think we'll begin. Good morning. I'm Sam Darkatsh, and on behalf of Raymond James, we'd like to welcome you to the Whirlpool Corporation presentation for today. With us from Whirlpool is Roxanne Warner, Executive Vice President and Chief Financial Officer; as well as Scott Cartwright, Head of Investor Relations and Treasury. Roxanne, I think your prepared remarks maybe 20 minutes or so, I think in...

Yes, I checked, it's about 20...

Perfect, which should leave us about 5, 10 minutes for Q&A in this room and then there will be a following breakout session in Amarante 2 immediately following. So with that, Roxanne, welcome back.

Thank you. Thanks. Thanks a lot Sam. Hey, everyone, good morning. Hi, everyone. Good morning. Good morning. Thanks for taking the time to step in with us today and to hear about Whirlpool. I am very excited to share with you a little bit about our wonderful story. So with that, let's get started. Well, I don't have to, you guys know all of the warnings and everything.

So in terms of today's agenda, we will go through a little bit of overview about Whirlpool for those of you that may not be familiar with the company. And then we will talk a little bit about why we're well positioned to win. And you're going to hear that as a consistent theme throughout this message. And then thirdly, capital allocation priorities, some of you may have either heard or participated in our very recent successful equity offering, and I will touch on it as part of the overall capital allocation priority.

So with that, let's get started. So overall, Whirpool is a global company, roughly $16 billion of revenue, approximately 66% of our business is our North American business unit, and then we have our Latin America business unit and then followed by our KitchenAid, SDA Global. We underwent portfolio transformation started about 5 years ago. And I think what's really great about what you're seeing on this chart is we're now made up of three #1 business units. So we're #1 in terms of share position in North America, #1 in Latin America with $3.3 billion of revenue. And then SDA, while you see the picture muscle over Europe from a global perspective, we are #1 in terms of the mixer brand in the world.

And this leadership is founded on 4 key areas. So one, starting from our premier brand and product portfolio, anything from our mass, when you think about Whirpool lets you. When you think Whirpool and Maytag to premium, when you think about KitchenAid and JennAir, we are across the spectrum. You will not find another appliance company that is covering the spectrum from master premium to premium in the way that we do.

Secondly, we're going to touch on the proven track record of innovation. And really, we're coming on the back of the Kitchen and Bath Show, where we won 23 awards, one of which was the best of the best in show. And so we're really, really proud of continuing to have that legacy of innovation. And then thirdly, you will hear me talk about our strong cost position, and that really starts from our strong manufacturing position that we have across the world, and I will touch on that in a few.

So why is Whirpool well positioned? And we stay well positioned, but frankly, and I'm a little bit biased, I would say, uniquely positioned to win. One, starting in North America, we have 3 catalysts of growth. In 2025, you may have heard that we changed over 30% of our product portfolio. And not only did we change 30% of our product portfolio, we had over 30% of flooring gains tied to those product portfolio. And that's really critical for us because with those flooring gains starting in 2025, we saw share gains. And that is absolutely critical as we get prepared for you what you will hear us talking about in terms of the housing recovery. But frankly, starting now in terms of driving discretionary mix is important for us.

The next piece I will touch on is really our manufacturing footprint. And I'll stop on this one for a while because the manufacturing footprint is so critical in terms of us winning in this tariff environment. And why do we believe that we would win? One, 80% of what we sell in America, we make in America. That's absolutely critical. And not only 80% of what we sell in America, we make in America, but we also use 96% of U.S. steel. This is very important when you think about the tariff environment, which is one that is focused on protecting U.S. business. And so with us having this manufacturing footprint, we really believe that we are absolutely positioned to win.

The next piece I would touch on, and for those of you that may have been here last year, yes, I covered the housing recovery, and we are waiting. And what are some of the key drivers that we talk about as it relates to the housing recovery is one, existing home sales. I probably don't have to tell you guys, yes, in 2023, we had a 30-year unit low, and it continues to persist. And we're really waiting. But while we're waiting, we're making sure that we are positioned to win when it does rebound. And so as you hear us talking about investing in products, this is absolutely critical because the drop in existing home sales, obviously, is also impacting discretionary demand. And so it's really important for us to have the product that's ready so that when that discretionary demand comes, we're here, we're ready. We have the right products and then it will drive mix.

The second one that's even more alarming is what you see with new housing. So we believe that new housing is undersupplied and has been for decades. And what is the key thing for us, again, you're going to hear this theme of us making sure that we are prepared for recovery is that we're making sure that we have the leadership within the builder business. So we do have the #1 share in the builder business, approximately 60%. So when that housing rebounds from a new housing standpoint, we are ready.

But our catalysts for growth do not only stop at being the net winner for the tariffs and ensuring the housing recovery. It is critical for us as a company to control what is in our control. And so as a result of that, we have a path to margin improvement, and you would see us really focus on these first 2. The first one being cost takeout. We have decades of demonstration of positive cost takeout. It is something in our company that's really ingrained in this focus of continuous improvement. At the same time, we are aware. And if you look at 2021 and 2022, yes, there was significant inflationary costs that came in and we still haven't taken out enough of that. And so that provides a key opportunity for us. And that's why you hear us talking about vertical integration, automation, always on cost improvement. If you heard in the January earnings call, we also touched on strategic sourcing initiatives, design to value. There is a heavy focus right now within the company on driving this cost out.

The second piece is around organic growth. The organic growth really is -- it's really driven by that brand portfolio that I touched on, and the strong product portfolio, given the fact that in 2025, as I said, we turned over 30% of the product portfolio. So with the strong brand, strong product, there is an expectation of share gains. And if you heard on the Q1 earnings call in January, we talked about having about 0.5 point of share gains driven by these new products. And then, of course, when you think about our mid-cycle target, which we've put out of EBIT margin of approximately 9%, it's critical that the U.S. demand fundamentals from a housing perspective comes back, okay? So those are the 3 key areas that we're really focused on cost takeout and organic growth, we're doing it now.

And then when you shift gears from North America and then you go into Latin America, which is also a very exciting part of our business, what is really great about Latin America is we believe that there is a low appliance penetration, which is for us a fundamental of a great growth opportunity and a growth opportunity that will be driven by very strong brands. So in Brazil, we have the #1 and the #3 brand with Brastemp and Consul. With brand Brastemp, frankly, it's a brand that has gone and surpassed appliances. You would hear in Brazil a comment such as -- and I'm going to totally butcher it, but it's like [indiscernible] Brastemp, which means it's good, but it's no Brastemp, right? And that is used well beyond appliances. And so to have a brand that has surpassed the plans, it's [indiscernible] and the penetration of that brand in Brazil.

The other piece for us is very exciting in Latin America is that Whirpool is #1 in Mexico. So again, when we talk about preferred brands and our opportunity for growth in Latin America, it's up to us. And then, frankly, with the SDA Global business, I could have just put a picture of the stand mixer and just stay silent on this one because I think we all know about the iconic presence of the KitchenAid stand mixer. It's one -- this is a [indiscernible] of our business. It's one that has double-digit growth and double-digit margins.

So from a finance perspective, I'm a little bit in love with this one, and we want to make sure we bring all the other business segments to a similar level. But for us, it's not about stopping at the stand mixer. We're really focused on taking the legacy that we have in the stand mixer and having adjacent category growth. And so we've been launching. We had the espresso machine, which has been successful. We've had blenders that we've launched at the end of last year. And so we're really excited about the growth potential and the long-term value creation of the overall KitchenAid SDA business. It's currently a $1.1 billion business, and we have aspirations to go even further.

So with that, we go to capital allocation priorities. And given the equity offering last week, I would tell you that I've been a little bit excited to really take a step back and message this to you guys today. We were fortunate that we had Raymond James at the same time. So let's dive into it. In terms of our capital allocation priorities, they haven't necessarily changed. I mean it's the same thing that we have been messaging probably for about a year now Scott? The main priority that we have as #1 always on invest in the business. And this is approximately $400 million of CapEx, and the other thing is, yes, you heard me talk about all of these product launches that we did in 2025, great. We have another $100 million that we'll be launching in 2026 that we're also excited about.

Then the other piece is debt pay down. So in the Q4 earnings call, you probably heard us talk about paying down about $400 million of debt. For us, when we look to the balance sheet, we knew that, that would not be enough. It is important for us as we go into the next phase of our organization, a phase of growth, that we have a balance sheet that is a little bit more deleverage, that is absolutely critical, and you're going to hear me talk about that in a few. And so not only would we pay down $400 million in debt in 2026, but we've decided that we will be paying more than $900 million in 2026 on the back of the successful equity offering that we did last week. Our long-term net debt leverage target remains 2x. When I say long term, I mean like in very few years because, as I said, the priority is to accelerate the deleveraging. And then in terms of funding dividends, we have a goal of continuing to fund a healthy and sustainable dividend and one that we will review quarterly with the Board.

So with that said, let's take a step back, and let me just go through why equity offering? Why did we do it? And I wouldn't go through again the high-level points about what is exciting and compelling about Whirpool right now. We fundamentally believe that we have the right strategy that would create value moving forward. At the same time, about a year ago, we took a step back with the Board looked at the balance sheet and we acknowledge that the balance sheet that we had did not provide the financial flexibility that we need to lean into the recovery and/or protect us in terms of downside risk, particularly given the uncertainty that's happening even right now.

And so what we did is we created a very integrated plan that had a number of levers, and you've seen us execute some of them. One, we've already divested some of the India business. We went from 51% to 40% as part of this strategy. The second piece was maybe what we call rightsizing the dividend, which you saw us do last year. So we cut the dividend by approximately 50%. And then this step that we executed last week was about providing an equity offering that had a balance between MCP and common, which would give us proceeds that we would use to accelerate the debt pay down, ending the year of last year with a net debt leverage of 5.5 and using the fact that we would have paid down $400 million of debt, you still would have ended with a net debt leverage that started with 5.

And so as we think about accelerating deleveraging, for us, it's critical at the end of 2026 that we get to that number that starts with the 4 and gets us not only at the high 4s, but trending towards the middle 4 in terms of our net debt leverage. And so we did execute the equity offering. The equity offering allowed us to raise approximately $1.1 billion in capital. Some of the stuff that we have not shared was shared today, the book was 5x oversubscribed. We spoke to over 110 investors of the calls that we had with investors, we had 90% convert into the book. And so during the discussions, actually, it was really exciting to hear from investors about their belief in the recovery and their belief in the strategy in terms of us getting the balance sheet in a stronger, more fortified way as we go into the recovery.

In terms of use of proceeds, we would use 85% to 90% to pay down debt. And then we will use 10% to 15% to invest in vertical integration and automation. So this is the cost takeout and getting ready to expand the margins that I talked about within our control. And frankly, with the vertical integration, some of it, we already have the projects lined up. And so we're ready to go. And so overall, the transaction itself reduces our net debt leverage from 5.5 to a number around 4.7. The other thing that the overall proceeds would do is our debt level in total is roughly $6.5 billion and so this puts us in a position to end with a number that's closer to $5.5 billion. And as a company, we have operated within that $4.5 billion, $5 billion debt level in the past. And so we know that with this transaction, we now have the dry powder, the financial flexibility for us to go into the next phase of Whirpool.

And so with the equity offering completed and all of the key drivers that I touched on in terms of our growth, we look at our long-term shareholder value creation thesis. And we believe that it is extremely strong. One, we have been over the last 5 years, as I touched on refocusing this portfolio. We are a smaller company, but a company made up of #1 business units. Strength in North America, strength in Latin America and strength in SCA. In terms of best brands and products again, we feel very confident with our portfolio of brands that I just touched on as well as the product portfolio that has been winning Best in Show and frankly, winning the floor.

In terms of being the domestic producer, as I touched on, in the U.S., 80% of what we sell here we produce here. The same actually goes with small domestic appliances. 75% of what we sell here we make here. And in Latin America, we are the largest domestic producer. And then lastly, the U.S. housing market recovery needless to see because we've been saying when it comes, we are absolutely ready.

So with that, thank you guys for taking the time to meet with us today, and I'll open it up for questions.

One question from [ Christoph ].

Yes, a question on the leverage. I mean, you mentioned that your target is to reach 2x debt leverage in the long term, but can you detail on the usage of future free cash flow, I mean, for deleveraging?

So I think everyone heard the question, although the last piece I didn't got you. So maybe we couldn't...

Use of free cash flow to support the deleveraging?

Absolutely. So moving forward, one, we're going to get the net debt leverage to that mid 4.5, right, as we think about 2026. When we think about 2027 and 2028, we have guided to a mid-cycle EBIT margin of approximately 9%. We have also guided to free cash flow of approximately 7%, and it is our expectation that with that mid-cycle performance, it will give us the free cash flow that would also help us to further pay down debt so that we move from that mid 4x net debt leverage to the 2x that we're expecting.

Questions for Roxanne. So this morning, I think you mentioned that you are updating your guidance for the year. Originally, it was a range of around $7 a share now after the equity offering at $6 a share, presumably Scott and Roxanne that implies that you're reiterating all your other expectations for the year. Talk about what you're currently seeing in the marketplace from a volume standpoint and perhaps more importantly from a pricing standpoint and mix?

Yes. So if in case everyone have not seen it yet, we did put out an 8-K to be in preparation for Raymond James that highlights what our guidance for EPS was and then the changes post-equity offering because for us, it was important that we had the transparency for the investors to see what it is from a share perspective as well as the impact from interest expense. Given that we just provided our guidance at the end of January, as of this time, we don't have any further changes beyond the post equity offering. And so that's why we wanted to make sure that we put that out.

In terms of what we're seeing in the marketplace, from a volume perspective, I will acknowledge that the winter storm that came in January, maybe 2 of them. From a volume perspective, I believe even the trade customers would say it did impact sellout significantly. What for us was exciting is that while we saw a significant downturn during that time because, of course, we had folks who are not going out to the stores, our new products had strong POS sellout during that time. And so that was good to see. I mean overall, we still have guided for the industry to be overall flat and so we're still expecting that, and we are still expecting from a volume perspective to get our gains to the new products.

I think from a pricing perspective, which for us is even more critical right now. As we did touch on in the earnings call, we were expecting to see, I would say, pricing improve as we go into the President's Day. And that is something that we did see when you look year-over-year, we did see, and I think some of the analysts also rolled it up, that there was improved pricing going into President's Day. So for us, that was good. And then as it relates to mix, as I touched on, still strong in terms of the new products, as evidenced by the fact that the POS, the sell-through for those new products remain strong even during the winter storm.

Question here, yes.

[indiscernible].

So the question was what level of existing sales do we view as normal. For our mid-cycle targets, we're aiming for 5 million, 5.5 million units is what our target assumes.

Other questions in the back of the room in the corner. Yes.

[indiscernible] can you just help us understand what's the [indiscernible].

So that is a point of clarification because when we say share gains and market share flooring, the comment is specifically referring to flooring, okay? So on the floor, when you look across our overall portfolio, we were able to gain approximately 30% more of flooring across our customers. And then from a market share perspective, resulting in market share gains in 2025, and we're expecting about 0.5 point of share in from it in 2026.

[indiscernible].

Correct.

Question here? Yes.

Can you talk about the timing of the equity offering why now -- why not waiting for sort of a better market [indiscernible]?

Yes. No, good question. So first, as I touched on, this was part of a 1-year plan that we had in the making, and we knew that in 2026, we wanted to go. There were 2 things that we -- just from an overall process standpoint, we're waiting on, one, the filing of the 10-K, and two, the overall Board approval. Just given the uncertainty that we have right now, I think, for us, it was just critical for us to go sooner rather than later, especially given what we've just seen from a geopolitical standpoint as well. We want to go into our next phase of this recovery with a stronger balance sheet and with extremely stronger financial flexibility and for us accelerating the deleveraging was key. And so we executed it as soon as we could at the start of 2026.

Other questions? Roxanne with the replacement of IEEPA with Section 122, I mean, ignoring the time frame and the transition and what have you, just focusing on rates. What does this do to your costs expected on an annualized basis? And then same question, your importer competitors does this improve or pressure the cost...

So that is actually something that we continue to analyze. I would tell you, I had a meeting on Friday around the impact of the change, and we have about 3 different scenarios based on the comments that have been made. So base case, you have a situation where with the section 122, there is the 10% of global tariffs. Is it 10%? Or is it 15%, which has been another question that has come up.

And then the other piece is, okay, but there was also a comment related to the fact that countries -- the country-specific negotiated tariffs would not go away, which is another scenario. In those scenarios, what we would say is our position remains very similar in the sense of what is -- what we would pay is relatively still less than what our competitors or competition would pay. We believe that with Section 122, there may be some favorable impact, but you also have to wait for the inventory to draw down for the ones that we had the IEEPA on. So there would be a phasing and a time related to that. I wouldn't at this point in time it's significantly material. It's something that we will continue to monitor because we are expecting maybe some other changes. You have the -- whether it goes to the 15%, whether we have anything from an update it relates to Section 232 has also been mentioned. So it continues to be a moving platform, one with uncertainty, but one way given our overall manufacturing footprint, we continue to be relatively in a stronger position versus our competition.

It was notable. I'm sorry, please.

So if you can get to this mid-cycle 5 million, 5.5 million housing units [indiscernible].

We have guided to that being approximately 9% of EBIT with North America, therefore, being roughly 10%. And you can see that, if needed, in the Q4 earnings call material, we also provide some free cash flow guidance around that as well. And so that is literally the page that I shared with the margin improvement with the 3 boxes where it requires cost improvement, organic growth and the housing fundamentals, those are the key drivers for that mid-cycle target of approximately 9% EBIT.

And what is that transferred into EPS?

[indiscernible].

We did not specifically given EPS guidance on it, but to Roxanne's point, basically, there are 2 buckets on the left are what we call controllable. And then the last bucket is really where you get 1 point to 2 points of margin expansion based on the macro cycle that we would be in. Because remember, you have 2 types of favorable mix with the housing recovery. You have product mix and then you also have within the category, you see consumers mix up into more premium brands and built-in products.

The industry was marked last year by a lot of pre-loading. Does the transition period of IEEPA to 122 allow importers to again preload or is that ship sales, sorry, for the word choice, but yes.

So based on our understanding of how it would work, which is basically the IEEPA would roll off at the same time that the Section 122 comes into effect which was supposed to be last week, Tuesday. So based on that, we expect that transition period to prevent the preloading from coming in. What caused the preloading last time was the fact that we had the announcement in roughly April. And then we had no way, right, in terms of the effective date, which therefore provided a final sale warning every month for our competition to therefore, bring in additional products. And so from April to October, they had the opportunity to, therefore, do the preloading. But we believe that this transition period, which one ends and the other one begins hopefully prevents that from happening again.

Timing is perfect. We'll continue this is Amarante 2 with the breakout. Thank you, Roxanne. Thank you Scott.

Thanks everyone. Thanks for taking the time.

Good morning, and welcome to Whirlpool Corporation's Fourth Quarter 2025 Earnings Call. Today's call is being recorded. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer; Roxanne Warner, our Chief Financial Officer; Juan Carlos Wente, our Executive President of North America and Global Strategic Sourcing; and Ludovic Beaufils, our Executive President of KitchenAid Small Appliances in Latin America.

Our remarks today track with a presentation available on the Investors section of our website at whirlpoolcorp.com.

Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements to assist you in better understanding Warwood Corporation's future expectations. Our actual results could differ materially from the statements due to many factors discussed in our latest 10-K, 10-Q and other periodic reports. We also want to remind you that today's presentation includes non-GAAP measures outlined in further detail at the beginning of our presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of results from our ongoing business operations. We also think the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operations.

Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. [Operator Instructions] With that, I'll turn the call over to Mark.

Thanks, Scott, and good morning, everyone. Today, we're going to discuss our 2025 results and share our expectations for 2026. Before we dive in, I would like to acknowledge 3 leadership promotions we have recently made. new faces or rather new voices on this call may together represent over 70 years of experience within Whirlpool. Each one of them brings deep operational, strategic and financial experience to a new role. .

So let me start by handing it over to Roxanne to introduce yourself.

Thanks, Marc, and good morning, everyone. I am honored to step into the role of Chief Financial Officer of Whirlpool Corporation. Having spent the last 18 years at Whirlpool, I have a deep appreciation for our operations and our firm commitment to driving long-term shareholder value. Prior to my current role, I served as Executive Vice President, Finance and Corporate Controller.

In 2021, I was the Chief Financial Officer of our European segment, where I led both finance and integrated supply chain operations. and supported the organization through our European divestiture. Joining Whirlpool in 2008, I have had the privilege of holding numerous roles across cost management, commercial and corporate finance including leading the finance functions of our U.S. laundry and U.S. sales organization in North America.

In 2019, I had the honor of leading Investor Relations, who connected with both our investors and analysts. I look forward to reestablishing those connections and creating new ones. I'm excited to work alongside the leadership team and our employees to deliver our next chapter of growth.

Now I will turn it over to Juan Carlos.

Thanks, Roxanne, and good morning, everybody, it's a privilege to be speaking with you today as I start my new role leading MDA North America and global strategic sourcing. I joined Whirlpool as an intern in 1996 and I have spent the last 30 years in almost all functions and regions of the corporation.

While my recent years were spent abroad, I have been in North America before, where I previously led our laundry business unit, the core of our product portfolio as well as serve as General Manager for our business with Home Depot. Having held this role before, I know that winning in North America requires continuing to strengthen our brand and product portfolio, enhance our customer relationships as well as our world-class supply chain to fulfill our purpose of improving life at home. I'm very excited to return to the MDA North America business. I'm looking forward to building on our powerful foundation and creating value for our stakeholders.

Now I'll hand the call to Ludovic.

Thanks, Juan Carlos, and good morning, everyone. Expanding my role beyond KitchenAid small appliances to our MDA Lat America business is an exciting opportunity. It's an opportunity to drive growth for both an iconic global premium brand and now iconic local brands such as in one of our most dynamic high-growth segments. I have spent the better part of my 20-year career with Whirlpool, developing our products and brands from inception to industrialization and to commercialization.

I went from leading critical categories in EMEA and in the U.S. to driving our product marketing organization in North America. These roles, combined with my more recent position in the global product organization and my current responsibilities with KitchenAid, have given me a unique vantage point on how to drive innovation and cost competitiveness to win in every channel and every market. I look forward to this tremendous opportunity to accelerate growth for our company.

Now I'll turn the call back over to Mark to provide an overview of our 2025 results.

Thanks, Ludo. I'm very excited about these leadership appointments and have every confidence that we have the right team in place to continue to execute on our strategic priorities.

As you're well aware, 2025 marked a difficult year with unforeseen challenges, in particular for our North American business. There are 2 particular challenges that our business faced: one, tariffs. As domestic producers, we will ultimately benefit from the tariffs that were put in place. There's no question in my mind. However, in 2025, we absorbed roughly $300 million of tariffs, largely for components and some finished products, while the industry did not yet move on pricing.

This might be surprising given that our competitors are 2x to 4x more exposure to tariffs than we are, but with significant amount of inventory preloading ahead of the tariffs and the uncertainty of a tariff framework might explain the delay of industry price moves. The good news is that we observed a meaningful change of industry pricing and promotions after mid-December into the MLK holiday and the upcoming President's Day.

Two, housing. As we discussed in prior calls, existing home sales are the most important driver for appliance demand and, in particular, for discretionary demand, which inherently is more margin-attractive. However, the mortgage lock-in effect, coupled with lower consumer confidence, has led to a 30-year low of existing home sales.

While there is no doubt about an eventual multiyear housing recovery, 2025 did not yet unlock the housing sector. With these macro challenges in mind, we delivered results largely in line with prior year. Our global organic revenues were essentially flat, and we're pleased with the MDA North America market share gains during the second half of 2025. Our operating margins were slightly below 5%, largely driven by the intense promotional environment in North America during Q3 and in particular Q4.

We delivered cost takeout actions of $200 million, but with the absence of industry pricing, they were not enough to mitigate the cost of tariffs. Lastly, our Latin America business had yet another strong year while our KitchenAid SDA business delivered outstanding double-digit growth rates with mid-teen operating margins.

With 2025 number rear mirror and despite the extreme macro volatility we experienced, we're confident about 2026. First of all, we believe we will be able to sustain the strong trajectory of our KitchenAid SDA and our Latin America business. For North America, there are a number of catalysts to drive margin improvements.

First, we already identified more than $150 million of cost actions primarily focused in North America. This will allow us to largely offset the remainder for tariff headwinds. Second, we launched a record number of new products last year. These new product launches have been hugely successful with expanded floor space and incremental share gains.

Third, the industry's promotion intensity has clearly normalized over the past 6 weeks. We have already announced and implemented promotional pricing changes as well. Lastly, while the new housing starts will likely still be slow, we do see a potential fast improvement of existing home sales on the back of lower mortgage rates. However, as you will hear later during our guidance discussion, we have not yet factored in any discretionary demand upside.

With this, let me hand it over to Roxanne who will discuss the 2025 results in more detail.

Thanks, Marc. Turning to Slide 6, I will provide an overview of our full year results. As Matt mentioned, our global organic revenue was flat to prior year, and we delivered significant cost takeout to help mitigate the incremental cost of tariffs. We did not see the industry pricing adjustments to offset these incremental tariff costs in 2025 and the prolonged intense promotional environment and favorably impacted our margins.

Ultimately, we delivered a full year ongoing EBIT margin of 4.7% and our full year ongoing earnings per share of $6.23. Given the challenging operational environment in 2025, these results are proof of our resilience and commitment to focus on what we control. We generated $78 million of free cash flow, which was unfavorably impacted by the timing of tariff payments and higher inventory necessary to support our new products.

In November, we executed the previously announced India share sale transaction, which resulted in a reduction of our majority stake from 51% to a minority stake of 40%. The proceeds were utilized to pay down debt in line with our capital allocation priorities. We are pleased with the results of this transaction and our routine position.

We will continue to evaluate all options to further reduce our debt throughout 2026, in line with our guidance and capital allocation priorities. We continue to fund a healthy dividend, returning approximately $300 million to shareholders in 2025.

Turning to Slide 7. I will provide an overview of our fourth quarter and full year results for our business segments, starting with MDA North America. On a full year basis, net sales, excluding currency, was largely flat year-over-year. We saw continued strong share gains throughout the fourth quarter, driven by the momentum of our new product launches. Promotional activity remained intense as industry pricing did not reflect the cost of tariffs, which impacted margins.

As a result, the segment delivered an EBIT margin of 2.8% in the fourth quarter and a full year EBIT margin of approximately 5%. Looking ahead, given the industry's pricing changes over the last 6 weeks, we expect a less promotional environment. In December, we saw a shortening of the Post Black Friday promotional period; and in January, we saw a decrease in the depth of the promotional pricing for the MLK holiday.

Based on these data points, we expect a less promotional environment during President's Day. We have already announced and implemented promotional pricing changes that went into effect in early January. We expect these actions to put MDA North America back on track for margin expansion in 2026, which we will discuss in detail shortly.

Moving to our MDA Latin America business. On a full year basis, net sales, excluding currency, declined approximately 2% year-over-year due to volume decline. In the fourth quarter, we continue to see economic instability in Argentina and an aggressive promotional environment in Brazil, which negatively impacted revenue and margins. These unfavorable results were offset by a favorable operational tax benefit related to the deval legal ruling. As a result, the segment delivered a full year EBIT margin of 6.2%.

Next, I will review the results for our MDA Asia business. On a full year basis, excluding the impacts of the India transaction and currency, net sales increased approximately 1% year-over-year. The segment delivered a full year EBIT margin of approximately 5% with 120 basis points of expansion year-over-year. The India transaction resulted in margin accretion of approximately 40 basis points, while the remaining benefit was driven by a favorable cost takeout. As a result of the deconsolidation of India, we will not report Asia as a stand-alone segment moving forward.

Turning to our SDA global business. SDA Global continues to perform very well, achieving impressive net sales growth of approximately 10% year-over-year in the fourth quarter and approximately 9% on a full year basis, driven by new product launches and strong direct-to-consumer business. Fourth quarter EBIT margins expanded 130 basis points year-over-year as a result of favorable price/mix. For the full year, the segment delivered a strong EBIT margin of 16% with 170 basis points of margin expansion year-over-year.

Now I will turn the call over to Juan Carlos and Ludo to review how Whirlpool's investment thesis is as strong as ever.

Thanks, Roxanne. Turning to Slide 9. I will cover how our MDA North America is well positioned to further organic growth and margin expansion. Our structural drivers for value creation in North America are stronger than ever. The first driver is our strong lineup of new products.

As Mark mentioned earlier, in 2025, we transitioned over 30% of our product portfolio to new products, and we're seeing a very strong response from both our trade customers and consumers. These new products gain significant more floor space and their predecessors within the key retailers, resulting in share gains as we exit the year, and we have more innovation coming in 2026.

Second driver is our unique position as a domestic manufacturer in the tariff environment. Our U.S. manufacturing legacy started over 110 years ago and we never left. We produce more of our appliances in the U.S. than any of our industry peers who in contrast, only produce approximately 25% of what they sell in the U.S., in the U.S.

Our U.S. factories use approximately 96% American steel and work with thousands of U.S. suppliers. We operate some of the largest appliance plants in the world, and we continue to make investments to strengthen our domestic position. The tariffs imposed by the current administration aim to support U.S. manufacturers like Whirlpool, and we're starting to see positive signs suggesting that the tariffs will become a tailwind.

As Roxanne mentioned, we have also observed a less promotional MDA industry throughout January in comparison to the same period in previous years. This suggests that the tariff costs for importers are beginning to impact their business, and therefore, the elevated promotions we saw last year are proving to be unsustainable in the long term. The last driver is the state of the U.S. housing market, which I will cover in the following slide.

Turning to Slide 10. The historical data both for existing and new home sales clearly signals a multiyear recovery is on the horizon. Looking at existing homes over the last 40 years, whenever we observe a multiyear sales trough, like the 1 we saw since 2022, a recovery has followed. The lack of recovery has created pent-up demand in the market.

Existing home sales are highly correlated with the discretionary demand in home appliances, which as a result, has also been suppressed. On new home construction, the fundamentals are also favorable and include decades of long undersupply of new homes since the great financial crisis, coupled with the highest aging stock of existing homes in the U.S., which now has a medium age over 40 years old.

Finally, while affordability concerns remain, the U.S. government has made housing affordability a clear priority to address, which only strengthens our prospects of a recovery. In this context and given our strong competitive advantage in the builder's segment, there is simply no company better positioned to benefit from the multiyear housing recovery.

Turning to Slide 11. Let me highlight one of the many new products we are launching this quarter that will continue to support our product leadership. Our new Whirlpool laundry tower allows the consumer to save space while having easy access controls. Featuring the new fresh flow bend system and an industry-first UB clean technology, this product reduces bacteria in the wash without requiring high temperatures that compromise your fabrics.

Now let me turn it over to Ludo to review the MDA Latin America and SEA global business.

Thanks, Juan Carlos. Turning to Slide 12. Let me explain why we believe the MDA Latin America business is uniquely positioned to grow. MDA Latin America has enormous growth potential given the low market penetration of appliances in the industry's compound annual growth rate projections of approximately 4% to 5%. Our MDA business in Latin America has a sustained track record of value creation rooted in the strength of our products and brands and is ideally positioned to take advantage of this industry growth.

We hold the #1 share position in the region, supported by our strong historical presence in Brazil with the and brands. These are leading brands in consumer preference that have held this position for decades and as a result, they're present in more than half our Brazilian homes. Whirlpool brand also holds the #1 position in terms of preference in the second largest market in Latin America, Mexico, and in many other smaller markets around the region.

We have built an exceptionally strong infrastructure across the region. We have a well-established supply base, some of the largest plants in the world, great distribution and service network in a direct-to-consumer channel representing approximately 20% of our sales. We are, therefore, incredibly well positioned to continue to grow profitably in this very large region.

Turning to Slide 13. Let me introduce one of the tools to drive that growth in 2026, a new lineup of refrigerators coming to the Brazilian market this quarter. Brastemp, our premium home appliance brand in Brazil, is launching a new portfolio of products in 2 of the most critical categories in the market, top mount and bottom mount refrigerators.

These new refrigerators offer increased capacity, improved energy efficiency and bring a refreshed aesthetic to consumers' kitchen. They are poised to do very, very well in the market starting this quarter.

Turning to Slide 14. I will review how well positioned the SDA global businesses for continued profitable growth. As you already know, KitchenAid is an iconic brand known for its high-quality, craftsmanship and performance as well as superior design. It is the #1 mixer brand in the world and with over 75% of the products we sell in the U.S. being produced in the U.S., it holds a strong competitive advantage in an industry that is almost entirely reliant on imports.

Across the globe, we have successfully developed strong trade relationships and more recently, have significantly expanded our online presence which now represents over 20% of our sales and continues to grow at an accelerated pace. Outside of the stand mixer, we're starting to drive tremendous growth in adjacent categories such as espresso, blenders, cordless appliances and other food preparation segments.

We are leveraging KitchenAid's strong brand preference, our industry expertise and our established infrastructure to drive profitable growth in these categories, and we're successfully reinvesting the proceeds of that growth into further growth acceleration, while maintaining highly accretive margins.

Turning to Slide 15, let me preview the exciting innovation coming to the SDA Global business this quarter. First, our KitchenAid compact grain and rice cooker. This tankless version of our popular grain and rice cooker now features precise technology, which automatically measures liquid as it is added based on your preferred texture and rice and all kinds of grains to perfection.

Next, our KitchenAid Artisan Plus stand mixer. This new stand maker will bring the biggest advancements to the KitchenAid tilt head mixer since 1955. This product is sure to be a hit to enthusiasts around the world, so stay tuned for the big reveal coming this March.

Now I will turn the call back over to Marc to review our expectations for 2026.

Thanks, Ludo. Turning to Slide 17, I will review our guidance for 2026. Given the recently executed transaction to reduce our majority stake in India, we have provided a reset baseline for our long-term targets in 2025 results. These targets reflect our business performance expectations during a mid-cycle, which will be after housing recovery has started, but before it reaches the peak. .

On a like-for-like basis, we expect revenue growth of approximately 5% in 2026. Our new product launches are expected to deliver growth in MDA North America, and we expect continued strength in our SDA global and international businesses.

On a like-for-like basis, we expect 80 to 110 basis points of ongoing EBIT margin expansion to 2026, EBIT margin of approximately 5.5% to 5.8%. Free cash flow is expected to deliver $400 million to $500 million or approximately 3% of net sales driven by improved earnings and significant inventory optimization. We expect full year ongoing earnings per share of approximately $7. This includes an adjusted effective tax rate of approximately 25%, which is an increase compared to 2025 and impacts 2026 ongoing earnings per share by approximately $2.

Turning to Slide 18. We show the assumptions supporting our 2026 ongoing EBIT margin guidance. We expect a positive price mix impact of 175 basis points from our recent and future new product launches and benefit from our previously announced pricing actions in a reduced promotional environment. While we have seen interest rates beginning to ease, we do not expect a material catalyst for new home sales in early 2026.

As mentioned before, we do see the potential for a faster recovery of existing home sales discretionary demand, but at this point, we're not factoring this into our guidance. We will drive further actions to optimize our cost structure and expect 100 basis points of net cost benefit from more than $150 million of cost takeout actions.

Based on having long-term steel agreements in place, we expect minimal to no impact on EBIT margin from raw materials this year. We expect approximately 125 basis points of negative impact from the tariffs announced in 2025, that will be concentrated in the first half of 2026. It is important to note that these impacts represent currently announced tariffs and do not factor in any future potential changes in trade policy.

With approximately 100 new product launching this year, we plan to increase investments in marketing technology which will impact margin by approximately 50 basis points. Currency and transaction impacts are both expected to have minimal impact to EBIT margin this year.

Turning to Slide 19. I will review our segment guidance. Starting with industry demand, we expect the global industry to be approximately flat in 2025. In the U.S., we expect similar demand trends to what we saw throughout 2025 with an emphasis on replacement demand. Strong replacement demand creates a solid foundation for industry volumes while consumer discretionary demand is still significantly below long-term averages.

Again, this might change as a result of faster growth of existing home sales, whilst providing upside to our demand forecast. We expect the MDA Latin America industry to be up slightly between 0% and 3%.

Finally, we expect the SDA Global industry to be approximately flat with our growth driven by new products and continued investments in our direct-to-consumer business. For MDA North America, we expect to deliver a full year EBIT margin of approximately 6%. Previously announced pricing actions are expected to positively impact the full year margin and additional cost actions are expected to be delivered throughout the year.

For MDA Latin America, we expect a solid EBIT margin of approximately 7%, driven by new product launches and continued cost takeout. And for SDA Global, we expect a strong EBIT margin of approximately 15.5%, driven by sustained momentum from new products.

Turning to Slide 20. Let me review the actions we are taking to deliver price/mix expansion. Firstly, as mentioned, we've seen a less promotional environment in MLK and President's Day. This is an encouraging indicator that our competitors are not experiencing the full cost of tariffs. We first saw positive signs with the end of a Black Friday promotion period. While in prior years, retailers and competitors extended Black Friday prices well into January, we observed meaningful pricing moves immediately after Black Friday, probably an indication of preloaded inventories finally being sold through.

Given these broader industry dynamics, we're confident in the 2026 pricing actions we previously announced. Secondly, the incremental flooring gain by the new products launched in 2025 is largely installed. The flooring costs are behind us, and we should start to experience the full benefit of these new products. As a reminder, the new products that we launched in North America gained over 30% incremental flooring on a like-for-like basis.

Lastly, we're focused on continuing to expand our mass premium and premium product offering where we see consumer preference for our brands and the opportunity to drive differentiation. Our KitchenAid MDA launch in late 2025 is a perfect example of how we see an opportunity to elevate and position our brands for growth.

Turning to Slide 21. You will see the actions we're taking to support our cost position and deliver over $150 million of cost reduction in 2026. We are accelerating vertical integration and automation in our factories, leveraging some of our core competencies to improve quality and efficiency in manufacturing. In particular, the vertical integration will not only bring us cost savings, but will further strengthen the resilience of our supply chain.

We're taking steps to optimize our manufacturing and logistics footprint. And lastly, we're launching a strategic sourcing initiative to deliver the best landing costs for our components. We have had significant success in the past with activating the sourcing initiative and are excited to renew its effort in 2026.

Turning to Slide 22. I will provide the drivers of our free cash flow guidance. I'm confident that we will improve free cash flow in 2026 and this is a key priority for us. We expect cash earnings of approximately $800 million, driven by an improvement in our earnings. We expect approximately $400 million of capital expenditures, as we continue to invest in our products and fund organic growth.

We plan to optimize our inventory and improve our working capital by approximately $100 million to support cash generation in 2026. And we expect approximately $50 million of restructuring cash outlays related to our manufacturing and logistics footprint optimization efforts. Overall, we expect to deliver free cash flow of $400 million to $500 million or approximately 3% of net sales.

Now I will turn the call back over to Roxanne to review our capital allocation priorities for 2026.

Thanks, Marc. Turning to Slide 23. I will review our capital allocation priorities, which are consistent with what we shared in 2025. Funding our organic growth is critical to delivering innovative products that meet our consumers' needs. We will continue to invest in product innovation, digital transformation and cost efficiency projects with approximately $400 million of capital expenditure expected this year.

Secondly, we are committed to reducing our debt levels. We expect to pay down at least $400 million of debt in 2026, continuing our commitment to deleverage.

Thirdly, we are committed to returning cash to shareholders through funding a healthy dividend. We will continue to evaluate our dividend funding and ensure it aligns with our progress toward our long-term goals. As a reminder, the dividend is approved quarterly by the Board of Directors.

Turning to Slide 24. Let me summarize what you heard today. Despite navigating a year of significant external shocks led by the substantial cost increase of tariffs, our 2025 results were largely in line with the prior year. We maintained our track record of cost takeout and delivered substantial cost reduction of $200 million to help offset the impact of tariff costs. We introduced a record number of new products, proving their early success through flooring expansion and share gains in the second half of 2025.

As we look forward into 2026, we have another strong pipeline of new products coming. With industry pricing expected to normalize and structural cost takeout actions yielding results, we expect margins and free cash flow to strengthen. We expect the SDA Global business to continue to be a bright spot with sustained momentum from new products resulting in significant year-over-year growth.

Lastly, we continue to be extremely well positioned to fully capture the benefits of the housing market recovery as it begins to turn in a favorable direction. I'm confident in our strategy and that our path forward will create shareholder value.

Now we will end our formal remarks and open it up for questions.

[Operator Instructions] Your first question comes from the line of David MacGregor from Longbow Research.

Yes. I guess, Marc, I wanted to start by just unpacking the '26 flat industry units number. And you referenced no expectations for increase in discretionary or builder, which would, I guess, imply a flat replacement demand outlook, but you also, at the same time, talked about seeing strength in replacement demand.

So I guess I just wanted to better understand that? And maybe within the context of that answer, you could just talk about the extent to which you're seeing pent-up demand as you had referenced. And then I have a follow-up.

Yes. So David, again, as you well know, there's 2 main components of replacement demand, discretionary demand. The replacement demand, what we base that is continues to stay on a very, very healthy structure level and that is still on the tail end of post-COVID, we saw a significant higher use of appliance, and that just drives a lot of healthy ongoing replacement demand.

As a reminder, as everybody knows, while we like that part of the business, it's not necessarily the most margin accretive part of the business. The discretionary side and just to be also very clear on the guidance, we have not factored in upside on the discretionary side. The discretionary side would have to largely come from increased remodeling activities and a particular faster or an uptick of existing home sales.

So that is not factored in, even though I think there is a certain chance that depending on what the mortgage rate environment will do that we will start a slow unfreezing of existing home sales. But again, as a reminder, it's not factored in, in our numbers, in our guidance, and as such, could potentially provide an upside. But again, let's just see how that evolves. So far, as you look in rear mirror in '25 existing home sales were just on a very low level, and that's stuck by pretty much.

And you had mentioned pent-up demand. I guess just what your assessment is at this point where that stands? And then I have a follow-up. .

I mean I think, David, there's a very significant pent-up demand tied towards the housing. And I'm not going to repeat. But I think everybody knows. I mean the entire housing market is -- in terms of new home sales is undersupplied in the tune of 3 million homes. Now that will not happen overnight, but it just means just the new homes will spell a multiyear uptick on demand. .

The other side is, and this is -- and again, that could potentially materialize earlier, the discretionary side, which comes with remodeling our existing home sales, I think, could accelerate faster than the new homes. And there is significant potential out there, as you know, but the consumer has equity, equity in particular in the form of housing stock.

So the perceived equity the consumer has is there. It will take an uptick or in consumer sentiment to unleash that. That, in my view, could happen faster than the new home sites. But again, it's right now we're -- as you all know, we're in a very uncertain global environment, and I would say if consumer sentiment changes, I think you could see an uptick already this year on the discretionary side, but certainly, it's just -- it's only a question of when it's not if, there is a multiyear pent-up demand still waiting out there.

Okay. Great. And then second, as a follow-up, I guess, you've had a very substantial product refresh in 2025 and along with that, of course, comes elevated flooring costs. What's the benefit in '26 from the relief on the flooring costs

David, you're highlighting a very important point. Just as a recap, and I have many of you listening understand but know that when you have a lot of new product introductions, and we -- as we added, in particular, in North America, we had the highest amount of product introductions in more than a decade, and it's been massive. We have, of course, factories, you have phase in and phase out costs because, of course, you don't run most efficient way if you 1 point take down production and you ramp it up, you have inefficiencies in there.

You have inefficiencies in warehousing inventory because for some period, and you saw that also in Q4, you hold inventory pretty much on phase out and phase in. And then lastly, you have very significant flooring costs, which just come with flooring with products. Now ultimately, it's like a return on investment, you get your return on the flooring costs, but it all hit our P&L large in '25. So -- and in particular, in the back half, and I'm not trying to take about infuse, it's just there, and it was -- it's an investment against the future.

So as we turn the patient to '26, first of all, you have the absence of these introduction costs, which is an uplift. The second one, now have a full benefit of a higher flooring. We know because, of course, we get weekly sell-out numbers. We know when new products are not just floored, they're selling. So we're very pleased with the sell-out. And so not only do you have the absence of a cost, but you also have tailwinds in the form of a demand of new products.

So I don't want to give a precise number how much that means, but of course, that is a very beyond normalization promotion environment, that's a key driver of where we see the improvement in North America.

Your next question comes from the line of Michael Rehaut from JPMorgan.

Great. My first question is for Roxanne and Juan Carlos. Congratulations, obviously, stepping into your new rules, our expanded roles and Roxanne, it's a pleasure working with you again. Wanted each of your perspectives on if there's any kind of how you're going to approach the jobs over the next couple of years? Obviously, the business has had a number of challenges, particularly in the North America margin, challenges through various macro, tariffs, promotional, et cetera. .

What's the road back from a margin perspective over the next few years? I mean, obviously, you continue to look at your kind of tried and true playbook of cost savings, better mix, et cetera. I know a lot of this is also macro led with the challenges in the existing home repair remodel market. But I'm wondering if you're looking at anything maybe a little bit bigger picture structural or kind of changing strategy then that might kind of jump start the pathway back or is it going to be more of the initiatives that you've done already and expanding on that?

Thanks, Michael. I will answer from a global perspective, and then I will move it over to Juan Carlos. First of all, thanks, it's great working with you again as well. The #1 priority for us continues to be, one, debt paydown and I will continue to have that focus, driving that is our continued focus on cash and working capital. You see in 2026, we have a guidance of $400 million to $500 million of free cash flow, and that is imperative that we drive our inventory down. And so that is going to be a #1 focus for us.

And then overall, we will continue to deliver on cost takeout, as we've done over the years and absolutely in 2026, price/mix is going to be absolutely a huge focus, one, on seeing the pricing from an overall industry, but then secondly, delivering on the benefits that Marc just touched on as it relates to our new product launches.

With that, I'll turn it over to J.C.

Yes. So thank you very much for the congratulations. I am super happy and excited to be in this new role. Like I mentioned at the beginning, I've been in North America before, and I was part on the, I would say, in the global financial crisis in 2008. We moved in 2008, and then obviously, that happened. So I was together with Marc in that turnaround in 2009-2010. And not that those tools will be working moving forward. But I think like Roxanne mentioned and we mentioned before, with the new products that we're putting in place with aggressive cost take actions that we have, and obviously, with our manufacturing footprint that is extremely strong in North America, we believe that focusing -- lasering focusing on that, we could turn the business around.

Great. No, I appreciate that. I guess, secondly, the sales growth like-for-like of 5%, and it looks like that's against a volume outlook of flat, if I'm understanding the segment -- regional segment guidance, by and large. I guess, that results in a balance of price and mix driving the growth. I wanted to make sure I'm understanding that right. And how much exactly you're anticipating to come from price versus mix? And lastly, if that 5% also, I would assume, applies broadly to the North American segment as well.

Michael, it's Marc. First of all, the 5% in North America or globally, the direction is also reflective of what we have in mind in North America. Also on a global level, we showed 1.75 percentage points coming from price/mix. There is a healthy mix portion because we have a lot of new products and premium products, but there is also pricing which comes with a more normalized environment.

So what we showed on a global level is also true on a North America level. So yes, there is also in organic in North America, call it, 2 to 3 points of unit growth in there because we know the new products have been picking up market share, and we expect some carryover into next year. So short answer is, there is a portion of price/mix. And the price mix also has a good element of mix in there, but there is also some unit growth into our North America assumptions.

Your next question comes from the line of Mike Dahl from RBC Capital Markets.

[indiscernible] your promotional pricing plans. Can you be more specific or quantitative about what you've seen in recent weeks and how that gives you the better confidence ahead of President's Day? I think quantification would help, if you can.

So Michael, so let me maybe give you a lot more color on what we've seen in North America up until President's Day. Obviously, I can't comment on the go forward. So first of all, in Q4, in some ways, we've seen 2 parts of a market in Q4. One was the non-promotional period where we had the new product in there where we actually like what we saw, and we picked up market share.

The promotional period itself was intense by any definition. And I think once the competitors announce their numbers, you would see it was intense. We made a conscious decision to hold our ground during this promotion periods. We did not pick up share during the promotion period. But frankly, it was a very costly investment. I mean there's no denial and you've seen that in our number. What difference we saw after particular Black Friday and is -- well, the meaningful difference is post Black Friday, the prices, the promotion prices immediately recovered pretty much exactly what a week after.

And that is, for those of you who follow industry lipidosis, is different from prior years. Very often, you saw that either retailer or competitors did not sell all the products Black Friday, prices were extended well in some cases into January, we did not see that last year. So as intense as the promotion period was, it also ended pretty abruptly. And these higher prices help now for pretty much 6 weeks.

Now we all know in 6 weeks, it's not 52 weeks, but it's 6 weeks. I mean that is very different from prior year. We saw a meaningful price change already on MLK. We have, of course, already announced our prices to trade towards President's Day. And what we see is the, call it, this normalized promotional environment certainly helps for President's Day. So we saw a big difference in the last 6 weeks. Again, is that a full extrapolation for full year?

No, we all don't know this is a competitive environment. But at least we saw over the last 6 weeks that the industry is finally starting to reflect the full cost of tariff in the prices.

Okay. Got it. And just to dovetail on that, can you give us a sense then within your margin guidance, and I'm thinking specifically the 6% for North America, how you envision the cadence between first half and second half?

Yes. I mean there are several elements coming in that cadence. First of all, you will not see the 6% throughout the full year. And there is Q1, in particular, will be still impacted by a number of factors. First of all, we just see other pricing or more positive pricing coming through, so it's starting to build and that is still a good guide.

On negative side, we will curtail production. We said we will control inventories, and we correct that we had too much of inventories. That will be a burden on our Q1 numbers in North America because we will adjust inventory. As highlighted before, cash is a key priority, and we take that very seriously.

So you will have the inventory reduction going against us in Q1, but pricing starts moving in our favor. And on top of that, you have now in Q1 compared to last year, you have the full cost of tariff in there. So there's a number of factors. So Q1 will still be clearly below that 6%. And as of Q2, we expect the slow and gradual buildup.

Your next question comes from the line of Rafe Jadrosich from Bank of America.

I wanted to ask on the capital allocation for the year. This free cash flow guidance of $400 million to $500 million, the $200 million dividend and then, I think, $400 million of debt pay down, there is a bit of a funding gap there. So can you just help us understand how we get to the full like debt paydown and dividend relative to the free cash flow guidance?

One of the things that we touched on in the script earlier as well is that we are pleased with the India transaction that we have executed, which turned our majority stake from 51% to 40%. As of this time, we will retain that position, but we will continue to evaluate all options to further reduce our debt in line with the debt pay down guidance of $400 million.

Got it. So is -- are there additional India sales competitive in the guidance or is that just an option that's sort of on the table? Are there other things outside of India that could be done to generate cash?

Yes. So Rafe, it's Marc. As said, right now, we feel very comfortable with where we are in India. So we're not going to make a statement about what if. But as you know, first of all, we have a number of minorities ticks throughout the world and India is not one of these where we continue to evaluate all the time where we are.

We also still have some smaller assets sales opportunity. We're small and which could be part of closing that element. And so we are -- the ideas which we have in mind, we're pretty confident that we can close that gap or I mean or specified very soon. But we feel right now the debt paydown, as Roxanne pointed out before, we will get going.

Okay. That's really helpful. And then on the promotional cadence that you're seeing from competitors, it's encouraging to see some of the improvement at the end of 4Q and into 1Q. Are you seeing like actual price announcements from competitors either on resale or wholesale -- or retail or wholesale? Or do you think they've sort of just worked through that inventory? What's driving this improvement in the promotional cadence that's out there?

Yes. So Rafe, so first of all, from our perspective, it's pure outside incumbent on competitors. We don't know what's going through ahead or whatever. So what we observe just more from a data set is we have a fairly sophisticated price scraping tool where every week, we see -- we get thousands of pricing for every competitor, every product, every SKU. So we have a fairly sophisticated in-house tool that we pretty much weekly observed everything which was going on in the marketplace.

So our comments in terms of promotion debt from what we see is basically with pricing scrapping to, which, I would say, is very accurate. And also my comments on recovery afterwards is based with price driving tool. The actual mechanism which competitors use, it's their decision. I would say it's partially that we also do, sometimes it's a like-for-like price change and sometimes it's just a reduction of promotional

But we don't know Ultimately, what matters to us what consumer prices are basically in the cards, and that's what we look at. But I would assume every competitor chooses slightly different tools.

Your next question comes from the line of Andrew Carter from Stifel.

I wanted to ask about the negative price/mix variance in 4Q and how it changed so much from kind of the 3Q guidance? I wanted to ask is that, number one, did -- I think you said at one point that you didn't participate in promotion, but it's obviously a more promotional environment. Was there anything to this about clearing activity, i.e., you had a lot of innovation. You also had a weaker market. Therefore, the old analogs didn't move as quick. So anything you can help us on that big delta and kind of the speed at which improves through '26?

Yes. So Andrew, I think what has changed versus what we had in mind Q3; coming into Q4, we knew there's still some preloaded inventory in the market. Obviously, because we don't have exact competitor data, I think what we may have underestimated how much fertility is out there. So the promotion that there will be an aggressive promotion environment we anticipated, but it was deeper than we expected in all transparency. .

And now at the same time, and I made that comment in the script already is the fact that the price is corrected pretty immediately after Black Friday, I would read as an indication that this preloaded inventory is out of the system. Because if it would still be there, we would have seen Black Friday pricing continuing longer.

So I think the big change is probably there was more inventory out there than we assumed. And right now, we assume that is normalized, and we kind of -- that is behind us. And again, what I said before, the last 6 weeks would indicate we're now in a more, what I would consider, normal competitive environment.

And I think at one point, you mentioned you get the sell-out data on a weekly basis. We can obviously see the AHAM data. I guess it gets cut monthly but released quarterly. We can see how far below the discretionary units are relative to '19. Are you seeing a quicker reversion in sellout? And I guess where I'm going with this is like could there be a massive catch-up in discretionary unit shipments relative to nondiscretionary there higher mix, if the turn has happened quicker about what I'm asking, and I know, just to be clear, your guidance is pretty much for 2026, more of the same on the discretionary, nondiscretionary mix?

Yes. So Andrew, I mean, first of all, to your question, we get sellout data, register data for about 70% of our trade partners. So we have a pretty good sense about how we are doing from a sell-out and coupled with that, we typically also get comparable house sales, i.e., we know how we're doing in the store in terms of picking up balance or not. So we have a very good sense, and that is, of course, critical in particular when we're trying to assess the success of our new product launches.

A lot of confidence you heard before comes exactly from looking at the sell-out data on a weekly basis. To your question about the discretionary demand, again, reemphasizing it's not baked in the guidance. Is there a certain chance? Yes. But you also -- we've been waiting for this uptick in discretionary demand for a long time and that's why we're a little bit cautious at this point. What really -- and again, it's -- the big driver will be ultimately consumer sentiment and the broader perception.

Consumer sentiment, and we've seen that before, changes a lot faster than other indicators. And right now, it's low. And if you just take January, consumer sentiment is low by any definition, so reading that, you wouldn't have a lot of confidence. But again, we have seen this coming around faster. And to your point, yes, that could unlock quite a bit of pent-up discretionary demand, but it's not factored in.

Your next question comes from the line of Eric Bosshard from Cleveland Research.

Question for -- just 2 housekeeping questions for Roxanne. First of all, a lot of talk about the last 6 weeks on price/mix. Is price/mix been positive in this 1.5%, 2% range over the 6 weeks, is that what you've seen in your business?

A couple of things to keep into consideration. One of the time periods where we saw the improvement is Black Friday. And so as you'd expect, during the Black Friday period, we are paying out for the depth of the Black Friday holiday. So the majority of the benefit as it relates to price/mix for the 6 weeks would really come in 2026. As Marc mentioned, from a Q1 perspective, though, keep in mind that there are other items that we will be doing, such as reducing production, which would therefore impact the Q1 results, and so we expect price/mix to build up as we go throughout the year.

Yes, Eric, maybe -- and again, keep in mind, we largely pay our sales incentives to a trade partner on sell out basis. So there's a delay effect when you pay out pretty much a lot of these costs. What we look at as an early indicator, but now we're getting to operation probably is also across ASVs, i.e., what is really the gross sales value which we have and that is favorable in the last 6 weeks. So that is an early indicator that we see the pricing coming through.

Okay. And then the second is the assumption in '26 on outgrowing the flat market by 2 or 3 points. Similar question, Roxanne. Is that what you're seeing now that your business is outgrowing the industry by 2 or 3 points? Is that what's happening now or is that a ramp in '26?

So Eric, I can comment on this one. That is almost entirely built on the success of new products. And that is not just the last 6 weeks. As I mentioned before, ever since -- again, they didn't all launch at the same time. There was a big KitchenAid launch end of Q3, but we have other products -- and but we will continue to have new products also in '26. So we see from these new products, the flooring gains and we also see the sellout gains. So that pickup in volume is, I would say, almost entirely driven by what we see from the new products. .

Your next question comes from the line of Sam Darkatsh from Raymond James.

Roxanne, J.C., ludo, again, congratulations. And Roxanne in particular, I know you well, very well deserved. And I think it made us all smile when we saw your -- the announcement.

Thanks, Sam.

A couple of quick questions. I know we've been dancing around the pricing question quite a bit this morning. The 1.75 guide for the year, what's the inherent assumption for industry like-for-like net pricing in order for you to achieve the 1.75.

So Sam, again, we're not publishing what we assume as an industry pricing and a lot depends on what competitors will do. Having said that, you saw earlier and that's why we added this slide with the 3 components of pricing. It's a better promotional environment and its new products and mix overall. So yes, in the 1.75, there is a component about what we just think from a less promotional environment.

Again, we typically but assume it's roughly 1/3 probably of that overall assumption or maybe half of a less promotional environment. But in all transparency, yes, we like what we saw over the last 6 weeks, but of course, we're just cautious in terms of extrapolating the last 6 weeks of the full year. And I think right now, this is something it's kind of a little bit of middle ground.

So to paraphrase, if there is announced increased industry pricing from competitors that would be additive to your price guide theoretically? I've got a follow-up, but I just wanted to clarify that.

Yes. There's obviously a lot of ifs and whens in forward-looking statements, but let's if -- the promotional environment, which we've seen in the last 6 weeks holds in the full year, we will like the outcome.

Okay. My follow-up question. I noticed the RMI guide remains flat for '26. We've recognized that steel is set, but there have been moves of late in things like resins and base metals since the October call. I'm guessing the resins are getting offset by lower oil prices. So I think that's pretty understandable. But on the base metal side, can you help us as to how the hedges work from a timing standpoint as to when that might flow through or if you are exposed to higher copper, aluminum, nickel, zinc, that kind of stuff in '26, potentially?

Sam, you know our business very well, and you pretty much already gave the answer. So steel, because we have multiyear contracts, it's flat in our assumption. There's still a couple of moving pieces. On resins, it's directionally a good driver is our assumption. But as you point out, aluminum and copper, in particular, a little bit a bad guy.

A little bit buffered because, as you know, we go out the edges and with certain hedging corridors. And that's why we're saying right now, but some of it all is -- would basically assume a flat or not a major surprise. And again, it's a wash of ins and outs, but we feel pretty comfortable about that RMI assumption.

Your next question comes from the line of Susan Maklari from Goldman Sachs.

This is on for Susan. First, I just want to go back on the cost action, the 150-plus tailwind for 2026. Can you talk about some of the -- what is the new actions that are going to be implemented this year versus the carryover impact from 2025 action? Can you elaborate on some of these measures put in place in terms of automation, strategic sourcing and footprint of rationalization? And what factors are you considering before determining whether additional actions would be necessary?

Yes. So Charles, it's Marc. First of all, there is some carryover, but frankly, it's not that much. It's carryover. This $150 million-plus, it's probably less than 1/3 is carryover. And that largely comes from the actions, which we initiated about the cost they got last year, but just carried through and the additional actions, the vertical integration is actually a new angle which we're pursuing.

We've made good experience with vertically integrating some components actually in our Mexico factories. And we will aggressively go after that also in North America, where we expect quite a sizable saving on respective components and frankly, also just more stability in our supply chain. That's one element.

Automation is an ongoing effort and will accelerate. That will also drive benefits what we refer to as strategic sourcing initiative, it's a fairly elaborate and sophisticated process, which we don't do every year because it's way too complex. The last time we've done that 6 years ago, and we got a lot of savings out of this one. It basically goes down to you take apart every single component, you weigh it, you do a global completely clean sheet assessment, what should cost be, we're putting it out for bidding across the world.

It's a very elaborate thorough process. And again, just for complex, you can't do that every year. But given that it's 6 years ago, I think it's right. And we know the tool, we've done it before and we expect probably in the overall context, almost 1/3 of cost savings coming out of this one.

Got it. That's super helpful color, Marc. And then second, I just want to ask on the continued progress you're seeing in small domestic appliances. It's good to see the 10% sales growth this quarter. When considering the business, how do you balance the growth momentum that you're seeing here versus holding to your 16% EBIT margin as you look to maximize your returns over time?

Yes, Charles, this is Ludo. I'll take this one. So as you said, we're very happy with the performance of the SDA business. We grew at 10% in Q3 and again in Q4, and we have similar projections for 2026 going forward. From a margin standpoint, what we believe is most of the -- highest value we can create, frankly, is through growth, given the level of accretiveness we have from the margins already. So we're very focused on delivering that growth. We're effectively reinvesting the margin that we created in excess of this 15% to 16% margin range into further acceleration.

And your final question comes from the line of Jeffrey Stevenson from Loop Capital Markets.

You reported healthy share gains in the third quarter from your new product introductions, which offset your first half share losses. But I was wondering if you could comment on your fourth quarter share gains and whether heavier competitor discounting and a soft underlying R&R demand environment prevented similar levels of share gains during the quarter?

So Jeffrey, based what we reported in Q3, we picked up quite a bit of share with the new product, and that offset what we lost in the entire first half. In Q4, the positive momentum when new products continued. So we continue to gain share with the new product. But of course, by definition, the overall promotion period in Q4 is just a bigger portion of a quarter than in our prior quarter.

During the promotional period, and that's what I indicated before, we did not pick up share. We just decided to hold our ground, and that's what we've done. So you have continued gains of share with the new products, but a promotion period, we didn't pick up a lot more. So overall, it ended with the full year, but we have a small market share gain for the entire year in North America and almost entirely driven by the back half and almost entirely driven by new products.

Understood. And then I wanted to go back to comments earlier on the replacement demand. And this was tracking to roughly 2/3 of North America MDA sales last year, which is well above normalized levels. And just so I'm clear in your guidance, are you not expecting any moderation in the percentage of replacement demand in 2026, unless we see some improvement in existing housing turnover? And then over the midterm, do you believe the percentage of replacement sales could move closer to 50% once the industry returns to a more normalized repair and remodel demand environment?

So Jeffrey, there's 2 components. The absolute number of replacement volume we get, we expect to stay stable. And we see that pretty stable now for an extended time period. And then again, it just comes a simple math. It's installed base and we know that. And the overall usage in terms of has come down a little bit because people are more using it more intensively.

That has now been stable for, I would say, 2 -- almost on a pure replacement side. So the volume will stay the same. But of course, when by definition, finally, the discretionary demand picks up, the percentage of a total market replacement will come down. Right now, it's well above 60%. And I would -- I wouldn't even call it peak cycle, I'd call it earlier mid-cycle, the discretionary side would easily cover 50%. Not easy.

But we had years where the discretionary side was up to 60%. So it's -- so percentage is all driven by how much we would see on the discretionary demand going forward.

So with that, I think that was the last question. Sorry, we went a little bit over time today, but there's new faces and voices and then I think a lot of good questions. Again, as you heard before from 2025 is behind us. It's in a rear view. We right now look just forward to '26. There are some encouraging signs already happening now in '26. And I think we laid out a catalyst why we believe we are confident and it's in our execution control to deliver on them, and that gives us the confidence behind '26. So thanks for joining me today, and looking forward to talk to you again next quarter.

Ladies and gentlemen, that concludes today's conference call. You may now disconnect.

Good morning and welcome to Whirlpool Corporation's Third Quarter 2025 Earnings Call. Today's call is being recorded. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer; and Jim Peters, our Chief Financial and Administrative Officer. Our remarks today track with a presentation available on the Investors section of our website at whirlpoolcorp.com.

Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements to assist you in better understanding Whirlpool Corporation's future expectations. Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K, 10-Q and other periodic reports.

We also want to remind you that today's presentation includes the non-GAAP measures outlined in further detail at the beginning of our earnings presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of results from ongoing business operations. We think the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operations. Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for reconciliations of non-GAAP items to the most directly comparable GAAP measures.

[Operator Instructions] With that, I'll turn the call over to Marc.

Good morning, everyone. Over the next hour, we will discuss our Q3 results, and we will provide you with plenty of data in detail. However, if you ask me to summarize the Q3 message in just 1 sentence, it is, our Q3 results demonstrate organic growth while our margins are still impacted by tariff preloading in the industry.

Let me first talk about our organic growth. We had 2 sources of growth in our business. One, our KitchenAid small domestic appliance business, which achieved a double-digit revenue growth; two, market share gains in our North American major appliance business on the back of our new product launches despite an intense promotional environment. As discussed in prior earnings calls, we have the largest number of new product launches in North America in over a decade. These new products have already secured strong flooring gains, and we are beginning to see very encouraging sell-out performance.

Now let me address our operating margins. Our North American operating margins are point below our expectations, which is not where we want to have then. So why is that? During our last earnings call, we presented 3 catalysts for value creation and margin improvement in North America. One, our new product launches. They are fully on track. Two, the housing cycle, which will undoubtedly benefit us, but not in 2025, which leaves the tariffs as a third catalyst for margin improvement. Tariffs come in various forms and have been slowly ramping up during Q3. In fact, the full burden of reciprocal tariffs which were announced in August and only became effective as of October 5 and are now finally fully in place. This ramp-up brought extensive preloading of inventories ahead of tariffs, and while this is not a surprise, it lasted longer than we anticipated.

Regardless of these temporary impacts, the fundamental perspective on tariff remains the same. We are the domestic producer with more than 80% of our U.S. sales produced in the U.S., while our competitors are largely importers. Tariffs by definition, support the domestic producer. The question is not if, but when. And we do believe we are close to a turning point. Container import volumes suggest a deceleration of imports in August and September following the peak in July. This is also supported by 17 consecutive weeks of container rate declines from mid-June. We do strongly believe in our value creation upside in particular in our North American business. not only because of our promising new products, but also because of our U.S.-based manufacturing footprint, which will, without any question, emerge as a competitive advantage. And our recent announcement of a $300 million investment in our U.S. laundry facilities is evidence of our confidence in our North American business. With this, let me hand it over to Jim who will discuss the Q3 results as well as our full year guidance.

Thanks, Mark. Good morning, everyone. Turning to Slide 6, I will provide an overview of our third quarter results. We delivered 100 basis points of revenue growth year-over-year, driven by our new product launches in MDA North America and a strong double-digit growth of our SDA Global business. Global ongoing EBIT margins of 4.5% were unfavorably impacted by the ramp-up effects of tariffs and foreign competitors preloading of Asian produced inventory. This resulted in a continued highly promotional environment through the third quarter of 2025.

Ultimately, we delivered ongoing earnings per share of $2.09, which was also supported by an updated adjusted effective tax rate of 8%, resulting in approximately $1 of favorability. Our free cash flow was unfavorable versus prior year by approximately $320 million, driven by the timing impact of tariff payments and the inventory build to support both new product launches and the incremental cost of tariffs.

Turning to Slide 7. I will provide an overview of our third quarter ongoing EBIT margin drivers. Price/mix favorably impacted margin by 50 basis points. We are seeing positive momentum from the cumulative effect of our new product launches and benefits of previously announced pricing actions. At the same time, these benefits have been dampened by the effects of inventory preloading resulting in continued promotional intensity. Our cost takeout actions delivered as expected, resulting in margin expansion of 100 basis points year-over-year, led by our manufacturing and supply chain efficiencies. Raw materials were essentially flat as expected. In the third quarter, we experienced incremental cost of tariffs of approximately 250 basis points.

While marketing and technology was flat versus prior year, we have continued to invest in our products and brands. Lastly, currency depreciation associated with the Argentinian peso and Indian rupee resulted in an unfavorable margin impact of 25 basis points.

Turning to Slide 8, I'll review the third quarter results for our MDA North America business. The segment achieved revenue growth both sequentially and year-over-year as new product introductions gained momentum and supported share gains. The tariff policy implementation delays and on-the-water exemptions led to continued preloading of Asian produced products in the third quarter. While our tariff costs are near steady state, some of our competitors are operating with largely pre-tariff inventory, which has resulted in a continued promotional environment, which negatively affected price mix. Despite these challenges, we are seeing positive signs that import volumes by foreign competitors are likely decelerating, giving us confidence that we will operate in a more level playing field as we enter 2026.

Turning to Slide 9. Let me review our new products supporting our growth in our MDA North America business. As previously mentioned, we have had a very strong lineup of product launches this year, with MDA North America transitioning over 30% of its products. A few highlights of our new product lineup include the Whirlpool and KitchenAid french door refrigerators. The true counter depth size seamlessly fits into your kitchen, allowing you to maximize your kitchen space, while the full depth size offers increased capacity and elevated aesthetic appeal to meet modern consumer expectations. The new KitchenAid dishwasher will allow you to discover next-level dishwashing with the automatic door open dry system, versatile third rack and filtration system that cleans itself. Finally, we have our new Whirlpool top-load laundry, which combines refreshed aesthetics with performance, allowing you to choose how to wash with the 2-in-1 removable agitator. These products are just a few examples of how we continue to position our business for growth in MDA North America by bringing new innovation into consumers' homes.

Turning to Slide 10. I'll review the results for our MDA Latin America business. In the third quarter, MDA Latin America experienced a net sales decline of 6% year-over-year, excluding currency due to volume decline. The challenging business environment in Argentina has negatively impacted the segment performance by approximately 100 basis points, resulting in an EBIT margin of 5.7%.

Turning to Slide 11, I'll review the results of our MDA Asia business. In the third quarter, MDA Asia saw a net sales decline of 4% year-over-year, excluding currency, driven by volume decline. Continued cost takeout was offset by industry volume declines, resulting in approximately 2% EBIT margin for the segment.

Turning to Slide 12. I'll review the results of our SDA Global business. The segment achieved double-digit net sales growth of 10% year-over-year, driven by the success of its new product launches. The segment continued to deliver a very strong EBIT margin of 16.5% as favorable price/mix and strong direct-to-consumer business continued to deliver margin expansion.

Turning to Slide 13. I will highlight how our SDA Global business continues to create consumer loyalty and excitement while bringing relevant new products to market. First, I want to highlight the highly sought after walnut wood accents now available in the espresso kit, beautifully crafted with the warmth and natural texture of real walnut wood. Our 3-in-1 pasta stand mixer attachment is designed to simplify the pasta-making process, allowing the maker to roll and cut their pasta, enhancing overall kitchen experience with 1 easy-to-use attachment. We also recently held an exciting stand mixer sweepstakes, where our limited edition tangerine twinkle color sparked interest across generations, earning approximately 2.5 billion media impressions in the first 5 days. These initiatives are just a few examples showcasing the success of our SDA Global business and the strength of this iconic brand.

Turning to Slide 15, I will review our guidance for 2025. As Mark highlighted, the near record levels of preloaded Asian imports have unfavorably impacted our 2025 financial results. As a result, we are narrowing our full year EPS guidance and revising other components of guidance to reflect the timing at which we expect some of these headwinds to subside.

Our net sales guidance of $15.8 billion is unchanged. As we continue to experience promotional intensity due to foreign competitor inventory preloading, we now expect to deliver a full year ongoing EBIT margin of approximately 5%. As mentioned, we are narrowing our full year ongoing earnings per share to approximately $7, supported by an improved adjusted effective tax rate. The 1 big beautiful Bill Act enacted in July 2025 includes the permanent extension of certain tax provisions and modifications to the international tax framework. As a result, we now expect an adjusted full year tax rate of approximately 8%.

Without the benefit of our updated tax rate, we would be at the low end of the previous ongoing EPS guidance.

Lastly, we have updated our free cash flow guidance to approximately $200 million. This reflects the updated expected EBIT margin and the impact of cash payments related to tariffs.

Turning to Slide 16. We show the drivers of our updated full year ongoing EBIT margin guidance. We have updated our expectation of price/mix to 75 basis points to reflect the intense promotional environment continuing through Q4 of 2025. Net cost takeout is unchanged and reflects the expectation to deliver approximately $200 million. The expected impact of incremental tariffs is still projected to be 150 basis points. It is important to reiterate that these impacts represent currently announced tariffs and do not factor in any future or potential changes in trade policy.

Marketing and technology investments reflect our continued efforts to invest in our products and brands and the improvement of 25 basis points demonstrates our ability to deliver more efficient marketing assets. Currency and transaction impacts are unchanged.

Turning to Slide 17. I will review our revised segment expectations. We have adjusted EBIT margin in North America to reflect the lower-than-expected price/mix due to competitor preloading. We expect a full year MDA North America margin of 5% to 5.5%. With unfavorable currency impacts and continued macro volatility in Argentina, we now expect an EBIT margin of approximately 6% in MDA Latin America. We expect MDA Asia and SDA global EBIT margins of approximately 5% and 15.5%, respectively, unchanged from our prior guidance.

Turning to Slide 18. I will review our free cash flow guidance. We've updated our cash earnings and other operating items consistent with full year EBIT guidance to reflect the impact of tariff costs. We now expect capital expenditures of approximately $400 million as we continue to prioritize and optimize our capital investments. We expect to build approximately $100 million of working capital, primarily driven by incremental tariff costs in our inventory. Additionally, the timing of tariff payments is negatively impacting our working capital as tariff payment terms to the government are much shorter than our existing supplier payment terms. The full effect of tariffs is now reflected in our free cash flow expectations.

Our restructuring costs due to previously announced organizational actions are unchanged at approximately $50 million. Overall, we expect free cash flow of approximately $200 million for the year.

Turning to Slide 19. I will review our capital allocation priorities. As demonstrated through our 100-plus new products launching this year, investing in innovation that meets our consumer needs is a critical priority to drive our organic growth. Secondly, we are committed to reducing debt levels. We continue to expect to pay down $700 million of debt taking a significant step toward our long-term target of 2x net debt leverage. As the ramp-up effects of tariffs impact our 2025 financial results, our debt paydown will be delayed into 2026.

Lastly, we have declared a fourth quarter dividend of $0.90 per share, continuing to return cash to shareholders through funding a healthy dividend.

Turning to Slide 20. I will give an update on the anticipated World pool of India transaction. As you may have seen announced earlier this month, we have now entered into strategic agreements between Whirlpool Corporation and Whirlpool of India, which include brand and technology licensing. These agreements, along with the transition services agreement, pave the way for how Whirlpool Corporation and Whirlpool of India will operate together over the next several years. This is a critical and prerequisite milestone to support the advancement of our expected transaction. With this structure in place, we continue to work toward an ownership reduction to approximately 20%. Ultimately, the proceeds from this ownership reduction will be used to pay down debt. We expect to announce a share sale transaction by December of 2025 and are targeting transaction completion in the first half of 2026.

Now I will turn the call over to Mark.

Thanks, Jim. And turning to Slide 22. Let me revisit why North America is well positioned to create significant value in the mid- and long term. As mentioned earlier, there are 3 fundamental components that serve as catalysts for growth for our North America MDA business. First, we are strengthening our product portfolio with over 30% of our North American products transitioning to new products in 2025. This compares to less than 10% product renewal in a normal year. Secondly, our strong U.S.-based manufacturing footprint positions us as the net win of new tariff and trade policies. Thirdly, turning to the U.S. housing market, we continue to see strong underlying fundamentals that point to a likely multiyear recovery. It is a well-established fact that the U.S. housing market is significantly undersupplied by approximately 3 million to 4 million homes, which is compounded by an aging housing stock with a median age of 40 years. Additionally, the elevated mortgage rates have created a pent-up demand that we expect to unlock once interest rates start to ease.

Turning to Slide 23. I'm pleased to showcase the new KitchenAid suite, which we began shipping to our trade customers in September. To put this in perspective, this is the first full KitchenAid redesign in a decade. And this line of products represent over $1 billion of annual business with strong margins. We've seen both strong flooring gains as well as very promising sell-out trends over the past weeks, and our KitchenAid market share is now trending towards its highest level in over a decade.

Beyond the exciting new colors, the modern design is aesthetic, this line is unique in its personalization opportunities. The personalization comes from a combination of interchangeable collars of handles and knobs, which can be easily changed at the consumer's home.

Turning to Slide 24. I will reinforce how Whirlpool will be the net winner of trade tariffs. So far, in 2025, tariffs have been a headwind to our business. As they ramped up, our margins were impacted by approximately $100 million of incremental costs in the third quarter. These costs are largely related to imported components and, to a lesser extent, to imported finished goods. Our competitors, on the other hand, took advantage of implementation delays and on-the-water exemptions to accelerate imports from Asia and flood the market with lower cost inventory. In fact, during the first half of 2025, we experienced nearly the highest level of appliance imports from Asia on record. As a result, and not surprisingly, the promotional environment has remained elevated, preventing us from realizing our competitive advantage as the largest U.S.-based producer of appliances.

Since reaching peak levels in June and July, we have seen signs that point towards a deceleration of imports. While we do not have import data for August and September available, the ocean container costs have been dropping at a rapid pace, a clear indication of lower demand for ocean containers. Also, as of October 5, we are operating in an environment where all imported appliances will be subject to the full reciprocal tariffs as well as the Section 232 tariffs. With this, the tariffs will finally begin to turn a tide in our favor given our unmatched domestic footprint.

As a domestic producer with more than 80% local production, we will have a clear relative advantage over our competitors. To put this relative advantage in numbers, as Whirlpool, we expect to face approximately 3% cost increase on an analyst base. Our foreign competitors on the other hand are estimated to experience approximately 5% to 15% cost increase depending on their production footprint as they are largely importers in the U.S. We are confident that these headwinds are temporary, and ultimately, Whirlpool is uniquely positioned to benefit from these policies mid- and long term.

Turning to Slide 25. Let me summarize our progress against these catalysts for growth. One, we are pleased by the early success of our new products launched this year. We've seen a positive reaction from our trade customers, gaining 30% increase in flooring compared to prior year. Two, with our domestic manufacturing becoming a competitive advantage, we're investing even more capital in our U.S. footprint. We just announced a $300 million investment in our laundry factories, which will add capacity and further fuel our innovation pipeline. And three, even though the housing market will need further mortgage rate reductions to finally gain momentum, we're exceptionally well positioned to win in the eventual housing recovery. We continue to see strength in our builder channel position and have just recently renewed a multiyear contract with 1 of the top 3 builders. As a reminder, we have contracted 8 out of the top 10 U.S. builders supported by our product and brand portfolio as well as our final mile delivery capabilities.

Turning to Slide 26. Let me just summarize what you heard today. We are pleased to have achieved organic revenue growth in the third quarter. Our SDA Global business continues to be a bright spot. New products and a successful D2C strategy delivered sustained growth and margin expansion throughout 2025 and will continue to drive value creation. Our market share gains in North American major appliances are just the beginning, and we're encouraged by the success of our new products. Beyond the success of these new products, there is no doubt that the 2 big macro cycles, U.S. tariffs and U.S. housing, will ultimately turn in our favor. Even with these macro cycles turn into our favor, we remain very focused on cost takeout initiatives and see more cost takeout opportunities as we head into 2026.

And now we will end our formal remarks and open it up for questions.

[Operator Instructions] Your first question comes from the line of Susan Maklari from Goldman Sachs.

My first question is around the share gains that you have seen this quarter. Can you talk a bit about how much of that is driven by the new product launch and the momentum that you're seeing there relative to promotions? And any changes that you saw company specific in that during the quarter?

Yes. Susan, so obviously, your share gains refer to our major business in North America, where we had a 2.8% revenue growth, which is obviously very encouraging, promising sign, and it's the first growth which we had in quite a while so. The share gains, which we had in Q3 essentially completely offset anything which we lost in the first half. So we're right now, we feel good about the share position to your question about where it's coming from. In very simple terms, the share gains came from new products, and promotion side of the business, we pretty much held our line. So it's a combination of both factors. So we held our line in promotions despite the pressure, but the share gains came with all the new products.

I think you heard me previous remarks that we're particularly good about the KitchenAid business. KitchenAid pretty much an all-time record market share in majors. And obviously, that is not a promotional part of the business. That is really new product launches. But we feel also very good about we launched a new french door [indiscernible]. We have an entire mid-layer of top-load laundry, which came out. So we feel very, very good about where we are with these new products, not only the flooring, but you now with a couple of weeks in the market, we have also some pretty good sell-out data, which is lining up very well for what's about to come.

Okay. That's helpful. And then it's nice to see the continued strength in the SDA business. Can you talk about what is driving that? And especially, it seems to be coming despite the weakness that we're seeing in housing and even with the consumer volatility out there. So can you just talk about the momentum there and how you're thinking about that business going forward?

Yes, Susan. In short, we feel very good about where we are from an FDA perspective and the momentum which we have, which we also think bodes very well also for next year. I think there's a couple of factors you play. First of all because you mentioned the housing, the small domestic appliance market is less driven than fiber housing than the majors. So it's just a fundamental difference. So it's much more of a discretionary sales, less replacement market discretionary sales. What helped us, I would say, is essentially 3 factors coming together, 2 internally, 1 macro. The first one, we have a lot of new products already launched in the last year. We have a lot of new products in the pipeline. And I think we're also -- we've demonstrated and you've seen that on our advertising investments, we supported these new product launches with significant investments.

So all these new products help us building the business, particularly outside the [indiscernible] also, but also in [indiscernible]. So that's one. So we continue to see great growth and strength in our D2C business, which, as you know, i is a kind of business the more volume we get for D2C business, but more profitable becomes just because of the surge in traffic costs are spread over in a much more favorable way. So we feel very good about the D2C progress. And thirdly, and this is -- and it may feel like SDA is not so much of a tariff story. It's a different 1 because almost the entire production of SDA, call it, outside our Ohio -- Green Mill, Ohio, factory is largely China-based production. So you had an earlier impact of tariffs in the SDA market because the China tariffs became into effect a little bit earlier than the rest of Asia. So that drove already a lot of industry changes and behaviors in the SDA segment.

So I would say in some ways, you could say the tariffs have found their way in the marketplace early in the end they have seen it in the major business.

Your next question comes from the line of David MacGregor from Longbow Research.

Marc, you talked about the gains in retail flooring. And I'm just wondering, I realize each of these listings would have a different velocity. But in total, under current demand conditions, what would those incremental listings represent in terms of 2026 unit growth?

David, that's a very specific question. So -- and I'm obviously shying a little bit away from giving the '26 unit growth perspective. But again, first of all, there's 2 parameters, which we already referred to. We replaced about 30% of the SKUs in North America in '25. Now that's not all completed, but now with the KitchenAid ABL that, I would say, products which we want to launch in 2025 have been launched. As a little reminder, and I know it's only footnote, the launching product comes with a cost because we typically pay for display costs, et cetera, which, of course, you see reflected in the margins. So we don't immediately give you value accretion because you pay for the floor.

Now typically, when you launch these new products, you have first for the flooring discussions, where we feel exceptionally good about where we are. 30% of our new products, which again compares to typically slightly less than 10% a normal year. we gained about 29% more floors than we had a pre succession SKU. So that's very encouraging. Now everybody in the retail industry knows getting flooring is 1 thing, then you need to get the sell-out.

The sell-out data is, of course, in some elements already a little bit more mature, in some elements less mature. But I would say across the board, in particular, KitchenAid launch, but also on this top-load launch, which I mentioned before in the French door, which feels very, very good. So put this all together, David, I would say we feel very good about the organic growth opportunities adding to 26% in North America irrespective of what the market does. We feel really good about the momentum which we have. The flooring costs will be behind us. So we feel -- and I know it may not fully reflect on Q3 margins, but trust me, we feel we have a good tailwind in our back coming from the new product launches.

Great. And just to be clear on this, and I have a follow-up question. But just to be clear, you're expecting the flooring costs, the upfront flooring costs to be fully realized by the end of the calendar year?

Yes, there will be by the end of Q4, we will have pretty much fully absorbed it. Now you also -- next year, we will also have some product launches, but it will be just, of course, a lot less than this year. This year has been the peak of all the product launches.

Great. Okay. And second question is regarding the tariffs and the $225 million of expected unrecovered 2025 tariff expense. How much of this do you expect to recover in 2026, presumably once you have the benefit of tariff protection?

Well, again, David, the tariff is -- there's a gross and the net component. On the gross side, we pay tariffs. So right now with $225 million, which we payed this year, assuming the tariffs are now stable. That is, of course, a big assumption because as we all experience, there's a lot of moving pieces, you basically -- the same amount next year probably will be in the ballpark of $300 million to $350 million. And just this is an early number. So of course, when you need to look at the delta of the gross tariffs. But when year-over-year comparison basically happened the Q1 and a part from Q2, which we basically have to kind of transition into.

Now the real benefit comes to us is, as we mentioned before, for us, this represents about 3% of our North America sales. If you calibrate the country of production of our competitors with respect to tariff rates, you would come to the conclusion that very respective headwind is about 5% to 15%. So of course, it puts us on a relative competitive advantage, which we ultimately should see in volume growth and overall margin appreciation in North America.

Your next question comes from the line of Michael Rehaut from JPMorgan.

First, I just wanted to kind of take a step back and look at, obviously, the continued promotional environment is the culprit here, and you expect it to continue through the end of the year. Just wanted to understand how this promotional environment compares to pre-COVID norms? And if there are certain metrics that you can kind of point to that would say, this is 5% more intense from a net pricing standpoint than prior periods, or certain metrics that we can kind of grab on to, to understand maybe if things normalize and inventory, excess inventory or excess promotions come out of the channel or so forth, we can kind of get a better yardstick of what to expect as things kind of calm down, let's say.

Yes, Michael, it's Marc. Obviously, that's a big question, and there's no precise answer to it, to be very transparent. So first of all, on a multiyear perspective, as you all remember, we had, I would say, pre-COVID more or less a normal promotional environment and is just a consumer market, which everyone in while needs to be stimulated with some promotion around the holidays. That's nothing new, nothing anormal. Now post-COVID in particular mechanics of side crisis, there was essentially a no promotional environment, and then these promotions quickly ramp back up again into the market in late '23, but in particular '24. So these were the big cycles.

Now this year, on top of this massive swing, you have a very rapid change in volatile environment because, of course, when everybody started the year we didn't anticipate tariffs to that extent. We didn't anticipate the preloading. So you have right now a lot of industry volumes shifting in the market, which is just not comparable to any normal year. So your question around normal not normal, I would more refer to the volumes which were shipped into the country, which is just outside any normal pattern. The consumer will always need some stimulation around some holidays, but that is nothing new.

So the real normalization effect comes from just industry shipments balancing and reflecting both a normal trends, but more important, reflecting real underlying costs. The volumes which were shipped into the country and to give you a little bit more expansion, we have a July import data, but we do not have the August and September data because of the government shutdown. So the July shipment data still showed elevated shipments into the country despite a flat market, which we all know. And as Jim showed earlier -- or I mentioned earlier, the first half of '25 pretty much was closed an all-time record on applying shipments from Asia. So it's very, very high and certainly above the market demand.

So we know there's quite a bit of inventory overhang, inventory, which was at pre-tariff cost. That's an important one. Of course, by definition, as you go through Q3 and Q4, with anticipation that import volumes come down, that excess inventory at 1 point with flush through the system. We would expect that to be happening kind of towards the end of Q4. We assume Black Friday volumes are pretty much set and prices are being determined already. So I would strongly believe that by Q4, any pre-tariff inventory is more or less gone out of the system.

So with that in mind, I would expect in '26 to see industry behavior, which is more reflective of normal shipment patterns and particularly more importantly, the underlying cost base.

I mean, Michael, just to highlight, as Marc kind of discussed earlier in some of his remarks, I mean next year in the industry, the tariffs will create an unprecedented level of cost increases for many of the participants. And so it's very hard to predict, but obviously, that should have an impact.

Right. No, I appreciate that. I know it's obviously a very fluid environment to say the least. Secondly, I wanted to shift focus a little bit to the balance sheet, and you've kind of outlined that you've delayed the $700 million debt pay down into I guess, the first half of next year. I was wondering if you could also just kind of address with -- over the next couple of years, how you're going to manage the revolver and financing needs as certain elements of the revolver come due over the next 2 years. And the remainder of those financing needs are going to be simply refinanced and pushed out or if there's going to be additional debt pay down? Any other kind of details around that front would be helpful.

Yes. And Michael, this is Jim. And I'd probably start with that our long-term goals haven't changed. And our long-term goal is to get to a 2x net debt-to-EBITDA have not changed. As you highlighted, I think the timing of some of that has changed. And maybe we start with the beginning of the year where we were able to refinance $1.2 billion of the term loan that we had, and we feel very good about that, setting us up very well. As you mentioned, the India transaction, which we feel we're progressing very well with and we've just announced that we've got all the major agreements in place that we need to, to get that transaction done now, that's delayed into 2026, at least from a closing perspective, but we still feel good about getting the proceeds of that and using that to pay down debt.

And so as you look at that, again, from an overall liquidity perspective, we feel good. Obviously, with the revolver that we utilize right now, that's always a cycle. And we've gone through that year for many, many years that we go out, we renew it, we continue it forward. So we believe we're in a good position there right now. So as I said, really from an overall Capital allocation and debt perspective, nothing has changed other than pushing the timing out. From a liquidity perspective, we feel good about where we are and what we have access to. And then in terms of the actions that we're taking to reduce our debt levels, we also feel good about how we've positioned ourselves to complete those in the not-so-distant future.

So again, as we go forward, we never talk about what our intentions are in terms of different things and all that. But the overarching strategy has not changed, and our intention to continue to pay down debt has not changed.

Your next question comes from the line of Mike Dahl from RBC Capital Markets.

I wanted to follow up on effectively the balance sheet and cash flow dynamic. The free cash flow guide, while reduced, still implies a pretty meaningful ramp in the fourth quarter. And that's kind of despite what you've articulated in terms of the higher product costs. So can you help us understand the moving pieces on free cash that you can drive that? And then if tariff payments, the second part of this are set to step up again. And next year, obviously, there's going to be moving pieces on other lines. But your free cash at $200 million is roughly in line with your reduced dividend. So it doesn't exactly drive incremental deleveraging. So how are you how you're thinking about the dividend? And any other color you can provide on kind of maybe the path of free cash beyond '25?

Yes, Mike, this is Jim, and I'll kind of take this here. What I would say is, first off, the path to get to our free cash flow at the end of the year, right now, we are sitting on a higher level of working capital than even we typically are at this point in time. And if you really look at it, one, we've -- with all the new product launches that we've done and everything, the amount of inventory that we've built ahead of time to position ourselves well through that as well as the cost of the tariffs that goes into inventory. And so you've got an elevated level of inventory there. Also, our receivables are at a typical level that they are before year-end, which they come down as we ship a lot of product and then collect the cash before year-end.

So just working capital alone is probably a $600 million-plus benefit to us as we head towards the the back half of the year. Additionally, what you've got is with the promotional payments that we make. A lot of those happened early in the year for the prior year, and then we build up the accrual as it goes. So that's another thing that benefits us late in the year because we then don't pay a lot of that out until next year.

So from a free cash flow perspective, at least for this year, there's a lot of big moving parts. But the piece that I alluded to earlier that is unusual for any other year is that the tariffs are such a significant amount and that we had to pay those within 30 days, and that was a onetime effect right now that we've now fully absorbed into there. And so for next year, it's not a negative effect anymore. It's just an ongoing type of thing that occurs.

Now your point on the dividend there and that our free cash flow matches about at the dividend level, we do believe, obviously, our free cash flow will be higher next year. And like I said, to begin with, you don't have the one-off impact of the tariffs coming in, which automatically gives you a benefit going into next year. I would say as we look towards next year, and we're not giving guidance or anything right now, but I think we get back to a more normalized level and get some of these working capital effects out, especially the timing of some of them and kind of return to what is a more earnings-driven free cash flow type of profile.

Okay. Yes, that's helpful color, Jim. The second question, I guess, is on the implied fourth quarter guidance and the margin dynamics seem pretty clear. it seems like the revenue guidance implies that there's a healthy step-up in year-on-year growth in the fourth quarter despite this competitive environment and soft macro? Can you just talk a little bit more about what's underlying that fourth quarter assumption to get to the 15% for the full year?

Yes, Mike, it's Marc. So actually, ultimately, the Q4 revenue or implicit revenue guidance for the fourth quarter is largely driven by what I mentioned before, our Q3 itself from a growth perspective, organic growth perspective was very good. And in particular, the 2 components, SDA, which by definition, even Q4 is bigger than Q3. So you have this SDA component where you carry a lot of momentum into Q4, and we feel very good. But the same is true for majors, North American majors. The new products are working and particularly the KitchenAid suite which I presented earlier, that is only flooring now. So we start now seeing full revenue benefit. So we feel really strengthened by these product launches in majors and with SDA and that ultimately drives that.

So we do not assume a higher unusual participation in promotional environment. We do what drive for our business and what creates value. So it's really coming from new products.

Your next question comes from the line of Jeffrey Stevenson from Loop Capital.

How has demand historically trended the following year after elevated levels of new product introductions and incremental floor space, whereas like we've seen this year? And have you typically seen an acceleration in demand the following year for new products benefiting from areas such as brand and marketing investments and then a full year of in-store floor displays?

Yes. So I'm smiling. There's an old thing in the appliance industry that the best year of product launch is the year after. And there's some truth to it. And the truth comes -- many of you have a phase in and phase out. It costs quite a bit of money industrially because you have a factory ramp down with all spare parts, which might be obsolete, and we have to ramp up with typical expenses. And the same, of course, on trade floors. So you basically need to take care of the old product, the new product, specifically flooring costs. There's margin expectations of retailers, et cetera. So a new product introduction as exciting as it is, it costs, okay? And the year after you just have a benefit of a full year product available and you don't carry the cost. But there's also the dynamics on the retail side. Sales associates may also need to get accustomed to the new product. They need to know which features to sell, what sells. And I think with every 1 after launched passing by sales associates on the floor so we get more confidence in selling the products, in particular, the [indiscernible] right rotation. So very often, Jeffrey to your point, the year after is actually a stronger year. We certainly assume it's true for in our case as well, but it's -- that's historically been the norm.

With the KitchenAid product, the KitchenAid major products that we've launched, there will be a multiplier effect as the housing market recovers eventually because this is the segment that's probably been hit the hardest, the discretionary segment in the premium segment. And so to Marc's point, you get the benefit of the launch into next year. But then as the housing market recovers, this is the segment that will benefit the most. And so we kind of see this as a multiyear opportunity.

Okay. Great. No, that's very helpful. And then I wanted to shift to the $300 million capital investment to add new capacity to our Ohio laundry manufacturing facilities. Can you just walk me through what went into that decision, and why now is the right time to move forward with both projects?

Yes. So basically, what you're referring to is a $300 million investment decision, which we did in particular, focus on our Clyde and Marian laundry factories. First of all, our laundry business is doing very well, in some cases, in particular in the top-load and new products, we're almost running out of capacity. So it's going really well, not across the board, but there're some constraints here.

Whenever you do a capital investment of that size, first of all, it's not an investment in 1 quarter. This is extended over 1 or 2 years. It's never an investment against the past, it's an investment against the future. And we are ultimately -- based on everything which we said before about the macro cycles, we are convinced right now that the investments, in particular, U.S. manufacturing USA-made products drive very attractive returns. And frankly, I mean, in very simplistic ways, the tariffs make just the return on investment of a payback cycle is just much more attractive. That's what it does. So yes, that is an investment done consciously against the perspective of a very promising future with U.S. manufacturing.

Your next question comes from the line of Sam Darkatsh from Raymond James.

So a couple of just clarification questions. First obvious one would be, any view yet, Jim, on what a ballpark '26 tax rate might be?

Yes, Sam, we obviously -- we aren't giving guidance yet and all that. But I think if you go back to the beginning of this year, as we kind of said, where we think our rate eventually normalizes could be in the 20% to 25%. But again, we've had numerous years here where we've been well below that. I think as we continue to evaluate what has happened with the environment and the different things that we've been able to take advantage of with recent changes. We'll obviously update that at year-end, but I think that's a good thought to at least continue to use as a long-term type of rate.

Sam, it's Marc. Just as a reminder also, a big part of it favorable tax rate came on the back of a Big and Beautiful Bill, which we didn't know at the beginning of the year. So I'm not -- well, of course, we can always wish I don't think there will be a similar tax bill change next year. And with that in mind, I think we should expect a more normalized tax rate. But we will, of course, give more details in January.

And my second question, and I respect that you're being hesitant to talk too much granularity about '26, but you do have a bit of an unusual situation with steel costs in that you've locked in a lot of your costs in '26, whereas your peers have not. What's your sense as to -- as it stands right now, what that relative cost advantage might be versus your -- for next year specific to steel? And then if there's typically this time of year around the third quarter, you do at least give us a sense of what raw materials might look like on a year-on-year basis for the following year? Any kind of color you can give on that would be helpful.

Yes. Sam, I appreciate your question. And as in every year, we've not yet given the exact guidance on raw materials. But first of all, steel, as you rightfully pointed out, pretty much 1 year ago, we went from typically 1-year contracts to multiyear contracts. We're largely locked and they're not all the same, but they pretty much operate within certain parameters. So in some ways, you couldn't consider our 2- to 3-year steel contracts pretty much as hedge kind of setup from a contract. So they give us a very predictable and stable steel cost base. Bearing all to mind, 96% of the steel which we purchased for our U.S. products are U.S. Steel made so in U.S. made. So that gives us a very good predictive base. Typically, when we set up this contract, we expect a certain discount versus the public available market data. And right now, we're well within that range. So we buy, on average, better than the market. Now sometimes you have spot rate fluctuations. But we're right now buying, I would say, slightly below market, and that's what we expect for next year. Keep also in mind, we still pay a lot more than for any China steel, hence, the whole discussion of the tariffs. So we're still about 2.5x as much as China. You never forget that.

So it's still a very significant cost burden. But to put it in a positive context, we do not expect any surprise on the steel side. And I would also, at this point, do not expect major, major negative or positive surprises on the raw material side in next year. I would say, on raw materials, there's a couple of pluses and minuses. We also have the copper trends, but then there's other offsetting elements. So by and large, I would expect a normalized raw material environment for '26.

Your next question comes from the line of Andrew Carter from Stifel.

First question I wanted to ask, getting back to kind of the cash flow for the year. It went from a neutral to $100 million since the last quarter. I realize things change, but the tariff has changed a little bit. So I'd ask why such a significant change? And also, what does that say kind of in terms of your visibility into all the tariffs and all the dynamics? And do you have complete visibility into what the actual cost should be, what your buy should be, et cetera?

Yes. I'll start this off, and this is Jim, and then Marc can kind of comment if he wants. But I think, to begin with on the tariff environment, obviously, it's been evolving throughout the year. And for everybody, it's been a -- you've had to understand what the tariffs are, how they should be calculated. You're working with -- it's not just internal. You're working with third-party brokers and other folks and all that. So it's a more complex process than probably all of us anticipated at the very beginning. With that said, I feel that now we have a very good understanding of it, and that's why we've kind of updated our numbers to reflect what they show. Now from a cash flow perspective, Again, the thing is that as you go through that and as we talked about earlier, the payment terms being relatively short was something that we obviously knew, but the dollar amount has continued to change. We feel we've got that revised right now. Then if you look at how that just flows through your cash conversion cycle. And unfortunately, it doesn't change on the other side, your ability to collect the cash further.

And so that became very apparent throughout the process. And that's why when you look at, I think you were referring to the $100 million change is really with working capital. As that reflects, obviously, the cost of the tariffs, but also as we talked about in there, with all the new product launches and all the other things we've had going on, obviously, we've built a certain levels of inventory, which, on a normal year, you can have some variability there. But on a year like this with this much product, new product introduction, you have a little bit more variability that comes into it, and we believe that, that will normalize itself as we continue to stock up the retailers with this inventory because, as Marc also talked about earlier, the flooring has done very, very well. And so we want to make sure now that we have enough product to support the sell-through that goes with that flooring.

Maybe, Andrew, just adding a fundamental question on tariffs. First of all, we, of course, read a lot and we are a very good and constructive the dialogue with various parts of the administration, very transparent, very supportive. But of course, the appliance industry is not the only tariff element. So there's a lot going on right now. But again, I really want to emphasize a very good constructive way. I would, right now -- there are certain parts of the tariff landscape, which I would consider absolutely stable and will stay. That's in particular about the 232 tariffs because we have been in place these parts are very stable. We also know there's other parts which are challenged. I still would ultimately believe, but that's purely my guesstimate that the Supreme Court will confirm in 1 way or another. But again, that's just me.

So from today's perspective, I would consider the tariff environment entering a more stable phase, but we should still be -- there could still be moving elements. Obviously, the biggest question mark is what happens about the China negotiation, but also here, I would assume there will be some form of a solution, a smaller one, which may have gone unnoticed, but it's a good thing for us. We were heavily impacted by the tariffs from U.S. into Canada. That was about $20 million to $25 million every quarter, and there -- that has been pretty much gone now.

So that is a good news, but that pretty much only impacted us in a negative way. So moves off a similar fashion, I still expect going forward, but compared to where we were 2 quarters ago, I think you have a much more stable and, to some extent, more predictable tariff environment.

And the second question I have on MDA North America, margin for the year, 5.5%. I believe the guidance from a couple of years ago for '26 was kind of 11% to 12%, correct me if I'm wrong, in the long term. I guess how much of that do you think you can recover? How much of that is tariff impacted? And I know you talked a lot about discretionary being below trend line, if you will, that would be the dishes and cooking. Any estimation of if those revert back to trend line, what margin tailwind would that be? Just any kind of helping blocks to get back to that long term?

Yes. So Andrew, so again, to repeat what I said before, we're very pleased with the growth which we have in North America, but our margins are not where we want to happen. I don't want to mislead in any way. No, we do not like where the margins are. The reason why we'll probably talk a little bit different today about the margin than usually because we know there's such a big promotional impact coming from these inventories. And that's -- we consider that a temporary effect, which is unfortunately. But of course, we also know the fundamental drivers will change. So that's why you hear us maybe talk with more optimism about it than you would usually expect from these margin levels.

Our expectation in North America remains critical. North America is a business that you can, and we should be able to deliver more than 10% EBIT margins. There are certain elements, call it, which is in our control, which we can do irrespective of market environment, such as new products, which I think we've demonstrated we can do. But other element, we will continue and double down even more so on cost, and you will hear more in the earnings call in January. We do believe we still have ample of cost opportunities ahead of us.

But then, of course, in addition, you have 2 big macro cycles, 1 tariff cycle and the housing cycle, which at one point will swing in our favor. I think the tariff cycle will clearly swing in our favor in '26. The housing cycle, I think it's more back half or more '27 related, but then will be a multiyear trend. So what I'm trying to say is, we have ample opportunities in our own control to get much closer with double digits. But of course, ultimately, you will also need the housing cycle to be clearly on the double digits or above.

Our next question comes from the line of Eric Bosshard from Cleveland Research.

Two things. First of all, I would love a little bit of color on what you're seeing regarding retail sell-through, you've given some sense of retail pricing. But just curious what you're seeing on retail sell-through or retail pricing in 3Q and then the trend in the 4Q?

Yes. So Eric, so -- and I think I mentioned this in the earlier earnings call, we have our sell-through data on about 65% of the retail landscape. There is unfortunately no data source, which reports across the board for all retailers. But I would say 65% of our retailers, of course, excluding the builder space, gives a pretty good perspective. And then you always calibrate against what we know is our respective balance of sale or "market share" with the respective retailers. So you calibrate these numbers, that gives you a reasonable good perspective about where industries likely be.

I would say, on a year-to-date basis, the overall industry or sell-through in appliances is very close to what we communicate at the beginning of the year over market demand. So I would say somewhere between 0 and plus 1%. Not a whole lot strong, but a lot of ups and downs. So whatever you see is industry shipment data, which fluctuates, that's more driven by just imports, et cetera. The actual sell-through is, I would say, best in low single digits.

We also see that continuing through Q3. So it's not negative. But keep in mind that slightly, maybe 1% or 2% plus sell-through is more driven still by the replacement market and less by the discretionary. That hasn't changed, but it's not a negative market. Now in all transparency and obviously, we can't get into much detail, it differs pretty strongly by retailer. There are some retailers more on the winning side and some retailers more the losing side. But overall, across the market, it is a, I would say, a very low single-digit growth rate.

Okay. And then secondly, just to clarify, the preloaded imports, obviously, you've talked a lot about this. Is this crowding out volume? Your revenue growth in North America was better-than-expected number. Is this just facilitating or delaying an increase in pricing a reduction in promotion? Or is it having a negative impact on your volumes? I'm just trying to square where this -- where you're implying that this is having an impact?

Yes. So Eric, I would say, in simple terms, the volume grade for us, and that I referred to is on came large in [indiscernible], but we growth came on the back of a new product. And on the promotional side of business, we held the line, and that was a conscious decision. I don't want to scale our factors, we held our line. So going forward, of course, it's impossible to say what our competitors might do. I would say once the inventory overhang is reduced or diminished then you will see a more, what we would call, normalization promotion environment, i.e., promotions reflecting the true including tariffs cost base.

Your next question comes from the line of Rafe Jadrosich from Bank of America.

It looks like the unmitigated tariff impact is unchanged at like 150 basis points. Can you talk about the mitigated impact like what you're planning for this year and if some of that's going to carry into next year? And what's like changed on the assumptions there?

Yes. I think, Rafe, the biggest thing it's more if you go through, and this is Jim. If you go through the margin walk, what you can see is that the tariff cost is in line with where we thought. But to Mark's point, what he was just talking about earlier with the amount of preloaded inventory that's been in the marketplace, the level of intensity in the promotional environment has been higher than we really anticipated throughout the year-end. And so I think that's the biggest thing right now is that, as Mark said, we really held the line in terms of our promotional spend and all that, but we really thought that at some point, you would see it taper off later in the year. And right now, with the amount of inventory that was preloaded, it's continued, but we do expect now that tapering off to probably come more next year.

I guess that brings us to the end of the questions. But first of all, we're already a little bit over time. Thank you all for joining us today. I don't want to recap everything we said, but I just want to come back to what I said at the very beginning. We feel really good about our growth, the underlying organic growth in particularly North America, new products and small domestic. We don't like where our margins are right now. At the same time, and I think you heard that, we strongly believe this is a temporary effect. And in the meantime, we do what is in our control, name with new products and cost launches. And I think the 2 macro cycles, which we talk about, they will turn in our favor. It's not a question of if it's entirely question about when. But again, we also have a lot of opportunities with our internal growth levers and cost levers, and we will remain focused on these ones.