Dana Corporation has announced a net loss of $US133 million for the fourth quarter of 2004, compared with a $62 million profit a year ago. Full-year net income was $82 million, or 54 cents per share, compared to $222 million, or $1.49 per share, in 2003.
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Unusual charges of $195 million after tax incurred in Q4 included: completing the divestiture of the automotive aftermarket businesses previously held for sale; announcing two facility closures and other manufacturing ‘realignments’; and repurchasing approximately $900 million of long-term debt.
“The aftermarket divestiture, our realignment actions, and the debt repurchase significantly improved our balance sheet and financial flexibility. Our efforts were recognised by two leading credit agencies, which returned us to investment grade in December,” said Dana chairman and CEO Mike Burns.
“In addition, year-over-year sales and net income, excluding unusual items, were both up significantly despite a challenging operating environment.
“Certainly, we’re not yet where we’d like to be. But the improvements to our balance sheet and operational performance were important steps in the continuing transformation of Dana, and I am proud of what our people accomplished in 2004.”
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By GlobalDataDana posted fourth-quarter sales of $2.3 billion in 2004, compared to $2.1 billion in the same period of 2003. Favourable currency effects added $73 million.
Excluding unusual charges, net income for the quarter was $62 million in 2004, compared to the same amount in the fourth quarter of 2003.
Earnings in the fourth quarter were negatively affected by the continuing effects of higher raw material prices. Net of customer recoveries, the increased cost of steel alone reduced earnings by $31 million after tax, compared to 2003.
Full-Year Results
Sales increased to $9.1 billion in 2004 from $7.9 billion in 2003, primarily due to net new business of over $400 million, strong commercial and off-highway vehicle markets, and favourable currency effects of $300 million.
Unusual items of $180 million in 2004 included the $195 million of charges recorded in the fourth quarter plus $15 million of net gains reported earlier in the year.
Net income in 2003 included $39 million of unusual gains on divestitures and debt repurchases.
Excluding unusual items, net income in 2004 was $262 million, or $1.73 per share, compared to $183 million, or $1.23 per share, in 2003.
The margin on higher sales and benefits from the company’s cost-reduction initiatives, as well as tax benefits, more than offset the impact of increased raw material costs.
2005 Outlook
“This will be another tough year for the automotive industry as well as Dana,” said Burns.
“We believe North American light vehicle production will be flat at 15.8 million units. We expect to see continuing pressure on raw material prices and energy costs, particularly in the first half of the year. And, as a company, we will also face the near-term challenge of replacing the lost earnings from the automotive aftermarket businesses that were sold, as well as the reduced earnings contribution from Dana Credit Corporation as we continue to wind that business down.
“On the other hand, we have renewed our focus on our global original equipment manufacturers. And we’re very optimistic about the outlook for the commercial vehicle and off-highway markets. We’re anticipating a 13% increase in North American Class 8 truck production to 293,000 units. The combination of these factors should allow us to increase our 2005 full-year sales to $9.6 billion.
“We expect Dana’s earnings to be lower in the first half of the year compared to last year mainly due to higher raw material prices. Therefore, we’re anticipating first-quarter earnings of 17 to 23 cents per share.
“At this time, our full-year earnings guidance is $1.40 to $1.62 per share,” added Burns.
