Welbilt, Inc. (NYSE:WBT) Q3 2019 Earnings Conference Call - Final Transcript
Nov 05, 2019 • 10:00 am ET
the three segments, but see a tough comp from last year's fourth quarter, driving a softer finish to the year.
We have updated and narrowed our full year adjusted operating EBITDA margin guidance to be between 18% and 18.5% about even with last year despite a weak start in the first quarter. There are really two moving pieces here. The first being a 50 basis point unfavorable revision to manufacturing costs driven by both the deleveraging effect of the softer sales and our more aggressive efforts on the transformation and related cost impacts we saw in Q3.
The second shift is a 25 basis point favorable adjustment to the FX impacts. With regards to the manufacturing costs, the emerging efficiency gains at our transformation plants along with the recent sales adjustment is enabling us to begin reducing our workforce levels at our plants in the fourth quarter. We expect additional reductions in the first half of 2020 at the transformation plants as their efficiencies improve. We also announced the consolidation of our Crem Shanghai plant into another of our existing facilities in China. This is expected to be completed late in 2020 with savings benefiting 2021.
Overall, you'll notice the net adjustment of the midpoints of our guidance ranges across margin drivers is flat with the prior year and down about 25 basis points from the low end of our previous range. By considering the depressed first quarter we experienced followed by three quarters, we expect to be around 20% and where we are with the Transformation Program, we continue to feel good about 2020 in our margin expansion journey.
Moving down the P&L from there, our updated guidance range for adjusted diluted EPS is now $0.67 to $0.72 per share. This reflects our updated sales and margin guidance ranges and our updated effective tax rate of 30% to 32%. The increase in the tax rate is due to our expectation for lower US income at 21% with the same level of net unfavorable permanent adjustments which tend not to vary with changes to income levels. We will address our 2020 tax rate outlook when we provide our annual earnings guidance in February.
That concludes my comments. Operator, we'll now open the call up for questions.