Johnson Controls (JCI) has reported record sales and profits for its first fiscal quarter but revised downwards its full-year forecast.
Q1 sales of US$10.4bn were up 9% compared with $9.5bn while operating income was up 12% to $598m and net income up from $375m ($0.55 a share) to $410m ($0.60).
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“Our first quarter results were in line with the expectations we announced at the beginning of the year. The automotive and buildings markets were stable in the quarter and we benefitted from our record backlogs in both businesses,” said chairman and CEO Stephen Roell. “Automotive Experience [interiors] revenues grew at a double-digit pace across all geographic regions. Power Solutions improved sales and income despite the soft demand for aftermarket batteries resulting from unseasonably warm winter temperatures globally.”
Interiors sales in the first quarter increased 15% to $5.3bn due mainly to incremental revenues associated with 2011 acquisitions as well as new model launches. Automotive industry production in the quarter increased 16% in North America, declined 4% in Europe and was flat in Asia. Revenues in China, which are mostly generated through non-consolidated joint ventures, increased 10% to $1.1bn.
Segment income grew 10% to $194m due to “significant increases in Europe and Asia”. European segment income benefitted from 2011 acquisitions, improving to $21m versus break-even last year. In Asia, the higher profitability of the company’s joint ventures resulted in a segment income increase of 69%, to $103m.
North America first quarter earnings were negatively impacted by costs associated with a new metals plant as well as higher engineering and launch costs associated with new business.
The company has increased resources dedicated to improving its launch efficiencies and quality, including adding management capacity in its automotive metals business. JCI said these actions will make an increasingly positive impact on earnings starting in the second half of fiscal 2012.
Power Solutions sales in the first quarter of 2012 increased 4% to $1.6bn due to a favourable product mix but unit shipments were lower than expected. The company attributed the soft demand to unseasonably warm winter temperatures which negatively impacted shipments starting in December and are expected to further impact Q2 results.
Segment income was $271m, up 25%. The increases were partially offset by costs associated with the shutdown of the Shanghai battery plant and the incremental costs associated with the consolidation of its hybrid battery joint venture.
Revised earnings guidance for 2012
JCI has lowered its earnings expectations for fiscal 2012 to due to several factors: euro assumption lowered to $1.30 from original forecast of $1.35; lower automotive production in Europe (now 19.6m units, down 3.5% versus original assumption of 20.1m, up 1.5%); weather-related softness in Q2 aftermarket battery demand; the assumed indefinite shut-down of the Shanghai battery plant (discussions with the Chinese government are continuing); Automotive North America metals start-up costs impact extending into Q2 and, in non-automotive, lower residential HVAC demand.
Second fiscal quarter 2012 earnings are now expected in the range of $0.52 – $0.54. Full year earnings are expected in a range of $2.70 – $2.85 (up 13% – 19%) versus earlier guidance of $2.85 – $3.00.
Johnson Controls said it was confident in its second half outlook noting that the 2011 second half earnings were significantly impacted by the Japan tsunami-related automotive disruption. In addition, the company’s second half 2012 earnings will benefit from the full-year impact of automotive acquisitions, cost reduction initiatives and investments in Power Solutions.
“While there are some short-term changes to our original 2012 expectations, our primary growth and profitability story is intact,” said Roell. “Despite the near-term challenges, we believe Johnson Controls will deliver double-digit earnings increases in 2012.”
