Maytag’s Profit Drops 80% as Costs Rise

Maytag Corp. said Friday that its first-quarter profit dropped 80% as costs for raw materials rose.

The company slashed its 2005 earnings forecast, and its shares fell 28%.

Net income dropped to $7.73 million, or 10 cents a share, for the quarter ended April 2, from $38.7 million, or 49 cents, a year earlier, the Newton, Iowa-based company said. Sales fell 4.2% to $1.17 billion.

Excluding restructuring costs, Maytag earned 14 cents a share. On that basis, the company was expected to earn 20 cents, the average estimate of analysts surveyed by Thomson First Call.

Chief Executive Ralph Hake is trimming $150 million in costs this year because of higher prices for steel and energy. He cut 20% of Maytag’s workers and closed its Galesburg, Ill., plant in 2004 to save money in the competition with Asian manufacturers. More job cuts are likely, Hake said.

Standard & Poor’s stripped Maytag of its investment-grade credit rating, lowering the long-term and senior unsecured debt to BB-plus from BBB-minus. The credit rating company withdrew the A-3 rating on Maytag’s short-term corporate credit and commercial paper.

Maytag is being hurt by newer designs from Europe’s Siemens and appliances from Asian makers such as LG Electronics Inc. and Samsung Corp.

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Best Buy Co. said in January that it would stop selling Maytag washers, dryers and ranges and stock other brands. Home Depot Inc., the world’s largest home-improvement retailer, said it would carry LG products.

Maytag shares fell $4.21 to $10.89 on the New York Stock Exchange. The 28% drop was Maytag’s biggest decline in at least 25 years, according to Bloomberg data.

Maytag lowered its 2005 net income forecast to 45 cents to 55 cents a share from $1.10 to $1.30. Excluding 5 cents in restructuring costs, Maytag was expected to earn $1.10 in 2005, the average estimate of analysts in a Thomson First Call poll.