Johnson Controls (JCI) has reported higher third quarter profits and a a 22% increase in revenues with higher sales in each of its three businesses, two of which are in the auto sector. The company also said earnings for fiscal 2010 were expected to be at the high end of previous guidance.
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Net sales rose to US$8.5bn compared with $7.0bn in Q3 2009, income from business segments was $496m versus $282m a year ago, up 76%, net income was $418m versus $163m and earnings per share were $0.61 versus $0.26.
The 2010 quarter includes a non-cash tax benefit of $51m, or $0.07 per share.Excluding this and a $9m non recurring item last year, net income in the current quarter was $367m or $0.54 per share, while net income in the prior year quarter was $154m or $0.25 per share. The company said it believes that using the adjusted numbers provide a more meaningful comparison of its underlying operating performance.
The company said that the quarter was negatively impacted by approximately $0.03 per share due to both the weaker euro and a non-cash impairment charge in its automotive business in Japan.
“We capitalised on the recovery in several of our markets, leveraging our market leadership and improved cost structure to gain share and improve profitability,” said JCI chairman and CEO Stephen Roell. “Sales in our automotive and power [battery] businesses grew at a double-digit pace.”
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By GlobalData‘Automotive experience’ [aka interiors] sales in the quarter increased 43% to $4.2bn versus $3.0bn last year due primarily to higher production volumes and new model launches. North American revenues increased 76% to $1.7bn from $1.0bn last year, while European sales were up 19% to $2.0bn from $1.7bn in the 2009 quarter. Sales in Asia increased to $440m from $262m in 2009. China revenues, which are mostly generated through unconsolidated joint ventures, rose 40% to $774m compared with $553m a year ago. Johnson Controls has a 45% share of the Chinese automotive seating market and has multiple new interiors supply contracts coming on stream over the next three years.
This business had income of $171m in the quarter, compared with a loss of $14m last year due to higher volumes, operational efficiencies and higher profitability of its automotive joint ventures. The North America segment margin of 5.6% reflects the increased production volumes and benefits of cost reduction initiatives. Asia segment margin, including the non-consolidated joint ventures in China, was 5.7%. Europe segment margin was 2.4%, lower than other geographic regions due to the magnitude of new launches. The company said it expected launch costs in Europe to continue at a heightened level to the end of 2011.
Johnson Controls has increased its forecast for North American auto production in its 2010 fiscal year to 11.4m units (previous estimate: 10.9m units). The company’s production assumption for Europe is unchanged at 16.7m units.
‘Power solutions’ [auto batteries] sales in the third quarter of 2010 increased 30% to $1.1bn from $0.9bn last year reflecting higher aftermarket and original equipment unit shipments as well as the impact of higher lead prices. Aftermarket unit shipments increased 9%, including the initial incremental volume associated with the award of all of Walmart’s automotive battery business, which began shipping in June. Higher global automotive production resulted in a 36% increase in original equipment battery shipments.
Segment income rose 27% to $135m versus $106m in the third quarter of 2009. The higher income was primarily the result of the higher volumes and non-recurring charges incurred in the prior year.
