Johnson Controls (JCI) announced third fiscal quarter revenues of US$9.5bn (down from $9.6bn a year ago) and operating profit of $383m, including several non-recurring items. Earnings per share were $0.59.
JCI said sales fell mostly after it sold its stake in an automotive interiors joint venture and foreign exchange effects, offset by other revenue growth.
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Operating income from its various business units rose 18% to $1bn thanks to the new Johnson Controls-Hitachi (JCH) joint venture and efficiency gains.
Costs of $167m were related to the proposed spin-off of Adient, the Tyco merger and integrating the JCH joint venture. Restructuring charges of $102m related to workforce reductions, plant closures and asset impairments.
"The company delivered another excellent quarter continuing our momentum as we progress toward separation into two world-class companies," said JCI CEO Alex Molinaroli.
"We experienced solid organic growth in both building efficiency and power solutions [batteries] and delivered significant margin expansion across all our businesses. Power solutions drove unit growth in all regions with start-stop units increasing 22% versus the prior year quarter, the Johnson Controls-Hitachi joint venture continues to exceed our expectations and automotive experience [interiors] generated another quarter of exceptional profitability."
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By GlobalDataJCI's power solutions fiscal Q3 sales rose 3% to $1.5bn. Global original equipment battery shipments were up 5% and aftermarket shipments up 1%.
Power solutions segment income of $262m increased 12% due to mainly higher volumes and pricing. Segment margins were 17.2% in the quarter, up 130 basis points.
During the quarter, JCI said it had formed a joint venture with Binzhou Bohai Piston, an auto parts affiliate of Beijing Automotive Industry Group (BAIC Group), to build its fourth Chinese automotive battery manufacturing plant.
The company also said it was spending $245m between 2016 and 2020 to double absorbent glass mat (AGM) battery production capacity in North America.
Automotive Experience sales fell 19% to $4.4bn due to the deconsolidation of the interiors joint venture and foreign exchange.
But segment income nonetheless was a third quarter record, up 1% to $344m due to restructuring savings, cost reduction and efficiency gains. Segment margins at 7.9% were up 160 basis points in the quarter (20 adjusting for the impact of the interiors JV deconsolidation).
Adient spin-off
JCI noted Adient, its automotive seating and interiors business, had begun discussions with lenders to secure finance ahead of the planned spin-off "on track for completion by the end of October".
It also expects to bring forward the closing of its merger with Tyco International to 2 September, 2016.
Forecast
JCI said it had tightened its full year fiscal 2016 guidance from $3.85 – $4.00 earnings per share to $3.95 to $3.98, "reflecting continued strong operational performance". It expects Q4 EPS of $1.17 – $1.20. This excludes the impact of the Tyco merger as well as various one-off items.
?"I am very proud of the progress our team has made toward the execution of the most significant transformation in Johnson Controls' history," added Molinaroli.
"The Adient team is now operationally ready and we expect they will soon become the independent world leader in automotive seating and interiors."
