ArvinMeritor’s head of strategic initiatives and treasurer, Mary Lehmann, has told investors at a conference in the US that the parts maker is revising its forecast for earnings per share from continuing operations.
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CFO Jim Donlon added: “In North America, we are encountering a weaker than anticipated economic environment in our commercial vehicle systems business group resulting from decreased freight volumes largely due to the decline in housing construction.
“Our customers expect the housing recession to delay the recovery cycle for North America commercial vehicle production into the 2008 calendar year. In addition, we are incurring premium freight and labour inefficiencies mainly in Europe, associated with unanticipated demand for higher production of truck parts, which is creating capacity issues for the entire supply chain.
“We anticipate that the company’s earnings for the fourth quarter of fiscal year 2007 will be negatively impacted by approximately $0.20 per diluted share due to the combination of these market conditions,” he said. “In addition, we will also report non-recurring items in the fourth quarter related to suppliers in financial distress, and tax law changes in Germany, which will require a write-down of the value of certain deferred tax assets. We expect these items to reduce our earnings per share for the fourth fiscal quarter of 2007 by approximately an additional $0.20 per share.”
“In fiscal year 2008, we anticipate the current soft market conditions will continue in the short term with recovery later in the year resulting in a range of $1.40 to $1.60 earnings per share from continuing operations before special items for fiscal year 2008,” Donlon said.
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By GlobalData“While we continue to be challenged by market conditions, we are encouraged by the results we are seeing from our ‘performance plus’ profit improvement programme. As previously reported, we expect to deliver cost improvements of $US75m in 2008.
“We also are pleased by our performance plus growth initiatives, including ArvinMeritor being sourced as the supplier on 55% of the MRAP vehicles awarded thus far, with additional potential upside as new awards are announced, and our arrangement with Chery Motors in China that will ramp up to anticipated sales of $150 m annually by 2010. In addition, our pension and retiree medical costs will decrease, largely because of improved funding and modifications to plan benefits. We anticipate that these savings, combined with our aggressive internal programs to reduce SG&A costs, will help to mitigate the soft market conditions in fiscal year 2008.”
To continue to maintain financial flexibility, the company has amended its revolving credit facility to modify certain covenants through the third quarter of fiscal year 2008.
