US: Johnson Controls books record Q1 sales and earnings
Vehicle interiors and batteries specialist Johnson Controls has reported record first fiscal quarter 2011 sales and earnings with double-digit improvements in all three business sectors (the third is buildings services). The company also increased its estimate for full fiscal year 2011 earnings.
Q1 net sales were up 13% to US$9.5bn vs $8.4bn in Q1 2010 and income from business segments was also up 31% to $533m from $406m a year ago.
Record net income of $375m, or $0.55 per diluted share, compared with $350m ($0.52 per share) in fiscal Q1 2010. The year-ago quarter included a non-recurring tax benefit of $62m and, excluding that, 2010 Q1 net income was $288m or $0.43 a share.
"Johnson Controls achieved record revenues and earnings despite the fact that our automotive and buildings markets are still far below historic norms," said chairman and CEO Stephen Roell. "Our automotive experience and power solutions businesses have recovered over the past year and continue to improve. We now have solid momentum in all three of our businesses."
Automotive interior sales in the quarter increased 12% to $4.6bn versus $4.1bn last year due primarily to higher production volumes and launches of new automotive seating and interior programmes. Revenues increased 9% in North America where automotive production in the quarter increased 7%. European sales, excluding currency, were up 13% compared with a 6% production growth. Asia sales increased 49%, while revenues in China, which are mostly generated through non-consolidated joint ventures, increased 37% to $1.0bn.
JCI has 24 joint ventures in China operating 47 manufacturing plants and holds 45% of the Chinese auto seating market.
Automotive experience reported segment income of $177m in the current quarter, up 46%, due to higher volumes and higher profitability of its automotive joint ventures.
The recently announced acquisitions of Hammerstein and Keiper/Recaro are expected to close in the second and third fiscal quarters of 2011, respectively. JCI said that in 2011 these are expected to contribute approximately $700m in revenues and to be earnings per share (EPS) neutral, with earnings from the businesses being offset by higher interest expense. In addition, the company expects to incur acquisition and integration-related costs, which have not yet been quantified. In 2012, the acquisitions are forecast to generate approximately $1.4bn in revenues and to be EPS accretive by around 10 cents a share.
Power solutions - mostly auto batteries - sales in the first quarter of fiscal 2011 increased 21% to $1.6bn from $1.3bn reflecting higher aftermarket and original equipment unit shipments. Aftermarket unit sales increased 20% reflecting market share gains in North America and Europe. Higher automotive production contributed to a 17% increase in global original equipment battery sales.
Demand for the company's automotive batteries increased at a double-digit pace in China where JCI expects to expand its manufacturing capacity from 4m units today to 30m by 2015. The company's second Chinese manufacturing plant opened as scheduled in the second fiscal quarter of 2011 and construction of a third Chinese plant, in Chongqing, begins next month.
Power Solutions segment income increased 20% to $217m versus $181m in the first fiscal quarter of 2010. The higher 2011 income was primarily the result of the higher volumes.
During the first quarter, the company's new battery recycling facility in Mexico began initial production as planned with full production expected by mid-year. In addition, the company said construction was progressing as expected on a new recycling facility in South Carolina. Upon completion of these facilities, Johnson Controls expects to be able to internally recycle approximately 50% of its North American lead requirements versus a historic level of approximately 15%.
Updated earnings guidance for 2011 sees revenues now forecast to increase 12% over 2010 to $38.5bn versus the previous forecast of $37bn due to the impact of the European automotive acquisitions, higher automotive production in North America and Europe and higher Power Solutions aftermarket battery volumes.
JCI is assuming automotive production assumption for fiscal 2011 in North America is now 12.5m vehicles compared with the earlier estimate of 12.3m. European automotive production forecast is now 18.3m vehicles compared with 17.6m.
Earnings per share for the 2011 fiscal year are now expected to total $2.50 - $2.55 per diluted share (excluding acquisition and integration related costs) compared to earlier guidance of $2.30 - $2.45.
JCI expects its second quarter 2011 earnings to be $0.52 to $0.54 per share, up more than 20% compared with the second quarter of 2010.
"We are increasingly confident in our expectations for record results in 2011," said Roell. "As we look beyond 2011, we are using the strength of our balance sheet to accelerate near-term investments to achieve long-term, sustainable growth. We believe our recent acquisitions and higher levels of capital spending will enable us to consistently outperform our markets and increase shareholder value."