Modine Manufacturing’s net sales in the second quarter of fiscal 2012 improved US$51.4m, or 15%, to $397m from the second quarter of fiscal 2011, with increases across all of its segments.
The most significant improvements were within the commercial vehicle markets in Europe, North America and South America, as well as the off-highway market in Asia.
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Operating income increased 32% from the second quarter of fiscal 2011 to $11.9m, mainly as a result of improved sales volumes.
Net earnings of $1.4m represented an $18.1m improvement, or 108%, from the net loss of $16.7m for the same period last year.
“We continue to see a slow and steady recovery of our end markets and, despite the continued concerns being expressed in the business media, our order backlog remains strong. In addition, recent program wins, particularly within our global truck and off-highway markets, demonstrate the strength of our competitive position in these target markets,” said Modine president and CEO Thomas Burke.
“Our business segments are performing in line with our expectations, and our results demonstrate that fact, with the exception of foreign currency impacts,” said CFO Michael Lucareli.
“The strengthening US dollar drove significant non-cash foreign currency losses during the quarter. These foreign currency losses and an environmental remediation charge had a negative impact of approximately $0.12 on diluted earnings per share for the quarter.
“As anticipated, sequentially our second quarter results were also lower due to normal seasonality in Europe and the planned acceleration of launch costs in Asia. Despite these factors, we remain confident in the full year guidance previously provided for fiscal 2012.”
In the original equipment segment, North America segment sales increased 7% to $148.8m, compared to $139.7m one year ago.
The increase was driven primarily by continued recovery in the commercial vehicle market. Operating income increased $3.2m to $10.9m compared to the prior year.
South America segment sales increased 17% to $48.1m, compared to $41.2m one year ago, primarily in the commercial vehicle and off-highway markets.
Gross margin of 18.4% was lower compared to the prior year due to the strong local currency impact on export and aftermarket sales and higher material costs year-over-year.
Operating income decreased $2.3m due to the lower gross margin, an environmental remediation charge of $0.8m, higher air freight costs and personnel-related matters.
Asia segment sales increased 57% to $20.0m, while gross margin improved to 9.1% compared to a gross margin of 5.6% one year ago.
This performance reflects the continued growth driven by increased program launch activity and maturing volumes within the off-highway market in China and the commercial vehicle market in India.
Operating results improved $0.4m to a loss of $0.8m compared to a loss of $1.2m in the prior year as a result of the improved gross margin.
Europe segment sales were up 22% to $152.0m, from $124.9m reported last year.
Operating income increased $5.0m from the prior year to $8.1m.
Gross margin improved 50 basis points from the same period last year, primarily due to improved operating leverage on the higher sales.
“Our ability to remain on target with earnings, despite the foreign currency losses this quarter, shows the overall strength and improvement in our business,” Lucareli said.
“We anticipate a strong fiscal year as gross margin improves and earnings accelerate in the third and fourth quarters.”
The company reaffirmed its expectations for fiscal 2012 including a 12% to 16% increase in sales.
