Johnson Controls earnings helped by non-auto units

UPDATED: 1/18/06 11:30 A.M. CHICAGO (Reuters) -- Johnson Controls Inc. today said fiscal first-quarter earnings from continuing operations exceeded Wall Street forecasts, as growth in building controls and batteries offset weakness in the auto interiors business.

Johnson Controls, which backed its earnings per share outlook for fiscal 2007, reported a loss for its North American auto interiors business, in-line with its forecast for a slow start to its fiscal year.

Net income fell to $162 million in the fiscal first quarter that started Oct. 1, from $165 million a year earlier, when Johnson Controls reported an 8-cents-a-share nonrecurring tax benefit.

Earnings from continuing operations rose to $168 million from $167 million a year earlier. Analysts on average expected Johnson Controls to earn 84 cents a share on that basis, according to Reuters Estimates.

Vehicle production cuts in North America by General Motors, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group prompted warnings by several large U.S. auto parts makers in the last few months of 2006.

Johnson Controls has been restructuring its auto interiors business, shifting some production to lower-cost regions and cutting excess capacity. It has also been diversifying, sharply increasing its building controls revenue with the acquisition of York International in 2005.

Morningstar analyst John Novak said the results were fairly solid given a harsh auto industry environment in the quarter that he expects to make it a tough quarter for most North American auto parts suppliers.

"Their portfolio diversification efforts are clearly paying off," Novak said. "Buildings and batteries, you have to be impressed by the results there."

AUTO INTERIORS PRESSURED

Revenue rose 9.1 percent to $8.21 billion, supported by growth in the company's building ventilation controls and batteries businesses. Analysts had expected $8.34 billion.

Sales fell 11.1 percent to $4.22 billion in auto interiors, the largest unit, mainly due to a 20 percent drop in North American revenue as big domestic automakers trim production. Segment income fell 69 percent to $35 million overall.

Johnson Controls said industry light vehicle production in North America was down about 8 percent in its first quarter from a year earlier, with light truck production off 14 percent.

"As you look longer term, their product portfolio and cost cutting efforts will allow the automotive unit to recover in time and leave it well positioned for an eventual improvement in the industry," Morningstar's Novak said.

The company's building controls sales rose 61.6 percent to $2.92 billion and segment income tripled to $123 million. Sales rose 9.5 percent to $1.07 billion in batteries, where segment income rose 26.8 percent to $142 million.

Johnson Controls said it expects fiscal second-quarter earnings of $1.05 per share from continuing operations, matching the average analyst estimate.

The company expects double-digit earnings increases in its buildings and batteries units and for auto interiors to return to profitability in North America in its second quarter.

The company also backed its forecast for fiscal 2007 earnings per share of about $6.00 from continuing operations and revenue of about $34 billion. Analysts expect $6.05 per share and revenue of $34.19 billion.

Johnson Controls is fifth on the Automotive News ranking of top global suppliers in 2005 with $19.4 billion in total sales to automakers.

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