Dana Corporation has reported that net income for the second quarter of 2004 increased 60% to $US108 million (including $33 million of unusual net gains), or 72 cents per share, compared to $52 million (including $5 million of unusual items), or 35 cents per share, for Q2, 2003.
Second-quarter sales were up 16% to $2.3 billion, from $2.0 billion a year ago.
“We are pleased to have delivered another solid quarter of operational performance,” said Dana chairman and CEO Mike Burns. “At the same time, we’re far from satisfied and continue to pursue greater focus, integration, and productivity in line with our commitment to meeting the needs of our global customers.”
Most of the sales increase was due to new business programmes and higher production volumes in Dana’s principal markets, particularly the North American heavy-truck sector.
“We continued to see growth in our gross margin – both year-over-year and sequentially by quarter – as we achieved further cost efficiencies and made progress in addressing the launch costs associated with our structures programmes. It’s important to note that these improvements were achieved in spite of the higher cost of steel and certain other raw materials that we experienced during the quarter,” Burns added.
“We are also enthused by the positive strategic and financial flexibility that we will have when we complete the sale of our automotive aftermarket business,” Burns said.
On July 9, Dana announced that it would sell its automotive aftermarket business to The Cypress Group for approximately $1.1 billion in cash.
The $33 million of unusual net gains included in the second quarter of 2004 included the recognition of $38 million in anticipated tax benefits triggered by the sale of the automotive aftermarket business and transactions that are part of the continuing program to divest assets of Dana Credit Corporation (DCC), which are expected to be completed during the third quarter. This was partially offset by $5 million of transaction-related expenses.
“While we’re happy to benefit from the additional income, we’re pleased that even without these unusual items, we still achieved second-quarter net profit of $75 million, or 50 cents per share, which is up substantially over the prior year.” Said Dana CFO Bob Richter.
Dana’s six-month consolidated sales were $4.6 billion, up from $4.0 billion during the same period last year. Net income during the first half of 2004 was $171 million, or $1.14 per share, including $35 million in unusual net gains. This compares to net income of $93 million, or 63 cents per share, including $15 million in unusual net gains during the initial six months of 2003.
“Excluding our unusual items and the results of businesses held for sale, our net income from continuing operations improved by more than 60% during the first half of 2004, compared to the same period last year,” Burns said. “Again, this improvement was largely the result of new business and strong production volumes in our principal markets.”
“While we are optimistic about production levels in the North American heavy-truck sector, the second half of the year will not be without its challenges,” Burns added. “We will continue to be impacted by many of the challenges that we experienced during the first six months of the year, particularly higher raw material costs. In addition, rising North American light-vehicle inventory levels also point to the potential for reductions in production schedules in that sector during the second half of the year.
“So even though we will continue to consolidate the results of the automotive aftermarket business until the sale closes, we are not changing our earnings guidance of at least $1.90 per share, excluding unusual items, in 2004.”