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Herb Greenberg is reporting that a big part of Whirlpool's last quarter profits are from tax credits. He reports that it appears last quarter, in a roundabout way, tax credits helped boost Whirlpool's earnings by 26% due mostly to Brazilian tax credits.

He goes on to say that considering that since Whirlpool doesn't go out of its way to point this out when it reports earnings -- there was nothing about Brazilian tax credits in a recent statement heralding "record results" -- so he should, implying there is some hidden underlying and inherent failing with this business strategy coming to fruition. It's not like Whirlpools JV and other business is a secret. Work on a world washer began back before 1990 and resulted in a JV building a plant in Brazil to manufacture washers for their market.

According to Citigroup Wise Analyst Jeffrey Sprague, 63 cents of the $2.38 a share Whirlpool earned last quarter can be tied directly to the credits. And with earnings per share sailing past expectations by 23 cents, Whirlpool's stock throughout the rest of the week popped more than 10% on the news, with little in the way of any discussion of the role that credits may have played. Of course this is a red flag to pundits and professional naysayers like herb, who one has to ask if he was left holding worthless Maytag stock or perhaps holds GE shares, he comes out so negative about this.

Considering the US, where he reports Whirlpool generates 57% of total revenue, the economic and housing slumps may ding sales this year, expecting a slide of 3% to 5%.

Whirlpool is quick to point out that new homes, as a portion of sales, have been slipping since the 1980s, and now represent 15% of demand.
Thankfully, washers break, and more than half of the business is driven by replacements.

For Whirlpool, most of its growth is in still-expanding Latin America and Asia, which generate 20% and 3% of sales, respectively. Herb makes that out to be problematic instead of a well thought out global expansion. An expansion which is helping puff up WHR profits through the credits and its economy. Whirlpool says that "based on current economic conditions," sales in Latin America should rise 5% to 8% this year.

Herb is more than happy to point out the reality that the "double bet could also turn into a double whammy if growth in Brazil stalls before the rest of the world recovers. Slower growth would equal fewer of those same credits. Losing them as an earnings enhancer could leave an ugly stain on a growth record, one that won't come out in the wash."
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