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US: NA downturn hits Tenneco Q3 results

By just-auto.com editorial team | 24 October 2006

Tenneco has reported third quarter 2006 net income of $US6m, or 12 cents per share, compared with $10m (23c per share) in third quarter 2005. Excluding restructuring and restructuring related adjustments, net income was $10m compared with $12m.

EBIT (earnings before interest, taxes and minority interest) was $45m, down from $50m a year ago.

Tenneco's strong European segment (Europe, South America, India) performance and growth in China and global aftermarket revenues helped counter the significant impact of North American OE light truck and SUV production declines on some of the company's largest platforms.

Quarterly results were also helped by the company's ability to cut costs, improve manufacturing efficiency and flex down operations as volumes declined.

Third quarter revenue was $1.122bn compared with $1.096bn the previous year. Favourable currency benefited revenue by $21m. Substrate sales, which typically carry lower margins, increased to $215m from $166m a year ago.  Excluding the impact of currency and substrate sales, revenue was $886m versus $930m a year ago. The decrease was primarily the result of OE production volume declines in North America.

Gross margin in the quarter was 17.5% versus 18.9% the previous year. European manufacturing productivity improvements and global cost reduction efforts were more than offset by significant OE volume declines in North America, higher steel costs, and higher restructuring costs. In addition, the growth in substrate sales in Europe, driven by more diesel aftertreatment and hot-end exhaust business, diluted gross margin. Steel costs in the quarter increased $9m year-over-year.

Tenneco's anticipates continued challenges in the fourth quarter as North American OE production is expected to be down significantly year-over-year, primarily in the light truck and SUV segment.

A strong geographic and market balance with more than 50% of revenue generated outside North America and a strong presence in the global aftermarket should help partially offset the downswing in North America until the end of the year.