Johnson Controls reported fiscal Q3 net income of US$571m, up 32% over last year. Revenues increased by 2%, to $10.8bn. Earnings per share were $0.83 compared with $0.63.
The 2013 quarter included one-off tax benefits of $140m which were partially offset by pre-tax restructuring charges of $143m ($104m after-tax) related primarily to severance costs and asset impairments, resulting in a net benefit of $0.05 per share. The 2012 third quarter included pre-tax restructuring charges of $52m, partially offset by non-recurring tax benefits of $22m, resulting in a net charge of $0.03 per share.
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“We are pleased with the significant improvement in profitability of all three businesses in the third quarter. Our initiatives to reduce costs and improve operational efficiencies continue to gather momentum and deliver margin expansion,” said chairman and CEO Stephen Roell.
“Despite a challenging production environment, our European automotive business generated a profit in the quarter and profitability improved in our automotive metals business.”
Power Solutions [auto batteries] revenue rose 8% to $1.4bn. While global unit shipments were higher, aftermarket battery demand was weaker than expected in both North America and Europe. Segment income was $171m, 12% higher, due to the higher volumes, an improved product mix and the incremental contribution from the recycling facility in South Carolina.
Automotive Experience [interiors] sales in the 2013 third quarter were $5.7bn, up 4%, as higher auto production in North America and Asia was partially offset by lower volumes in Europe. Automotive industry production in the quarter increased 6% in North America and declined 1% in Europe. Revenues in China, which are primarily related to seating and generated through non-consolidated joint ventures, increased 23% to $1.4bn.
Segment income was $279m, 33% higher, with higher profitability in all three automotive segments. Third quarter income from the European automotive business was $11m, a “significant” sequential quarterly improvement from the loss by the business in the second quarter of the year. The improved performance in Europe was attributable to its metals operations and the benefit of restructuring.
Johnson Controls said it believes the automotive production environment for the remainder of the year is positive with the Chinese market remaining strong, North American continuing to improve and Europe showing signs of stabilisation.
JCI also announced it would sell its HomeLink product line to mirror specialist Gentex for approximately $700m. The transaction is expected to close in late Q4 to early fiscal 2014.
JCI said the continuing process to sell the remainder of its electronics business is progressing as planned and that it is targeting an announcement of a definitive agreement on or before its 2013 Q4 earnings release date.
It said separating HomeLink from the rest of the electronics business was expected to maximise value as the individual businesses offer distinct advantages for different sets of strategic buyers.
Fiscal fourth quarter 2013 earnings are expected to be $0.93 to $0.95, resulting in full fiscal year earnings of $2.64 to $2.66 per share.
