Falling global vehicle output has prompted interiors and battery supplier Johnson Controls to revise its 2009 sales forecast down 3% to about $37bn and forecast earnings per share in the US$1.95-$2.10 range, 10-16% lower than for 2008.
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“[Our] diversified business portfolio and ability to improve [our] cost structure are expected to partially offset the difficult economic environment with [the] buildings and power businesses forecast to post solid earnings improvements in 2009,” the supplier said in a statement.
It added that assumptions for lower lead prices and a weaker euro would reduce 2009 sales by approximately $1.7bn.
It has based its revised forecast on North American auto production of 12.3m vehicles, European production of 21.2m units, and slowing output in China.
But the company, which also makes products for the building industry, sees North America institutional building construction spending up 3% and non-US, non-residential construction spending up 5% along with a flat North American residential HVAC (heating, ventilation and air conditioning) market and “relatively stable” global demand for aftermarket products and services.
“We recognise that we are facing a challenging environment in our global markets,” said chairman and chief executive officer Stephen Roell.
“At the same time, we are entering fiscal 2009 with record backlogs in our automotive and building efficiency businesses and confidence in our ability to improve our cost structure. Based on what we see today, we believe we can achieve solid financial performance during this volatile economic environment.”
The company said it expects approximately 7% revenue growth in 2009 in its building efficiency business due to higher global demand for its energy efficiency and greenhouse gas reduction solutions for non-residential buildings.
But it said 2009 automotive revenues would be down 6% compared to 2008.
“The impact of lower production in mature markets is expected to be partially offset by the launch of new automotive interiors contracts and growth in emerging markets.”
The company also announced its global backlog of net incremental programmes that will launch to the end of 2011 increased 14% over the previous three-year period to $4.5bn, underscoring market share gains.
“Earnings in 2009 are forecast to be lower due to the industry volume reductions and higher launch costs associated with new seating and interiors programmes in Europe,” Johnson Controls said.
Battery product sales are expected to increase 3%, excluding the impact of lower lead prices, due to higher volumes resulting from increased market shares and favourable product mix. If lead stays at the current lower price, sales are anticipated to decline 8%; however, margins will increase “significantly”.
The company also said it expected mid-term automtive margins to increase to 5%, consistent with earlier guidance.
The company said it expects to earn $0.73 per share in its fiscal fourth quarter, ended 30 September, excluding the impact of a previously announced restructuring charge of approximately $500m. The earnings forecast is consistent with its guidance of $0.72-$0.74. Full year earnings are expected to be $2.33 per share excluding the restructuring charge, up 11% over 2007. Q4 earnings are out next week.
