Industrial gases producer Praxair, Inc. (PX) reported Wednesday a decline in third-quarter profit, reflecting a 20% decrease in sales on lower volumes and unfavorable foreign currency. On an adjusted basis, earnings per share came in above analysts' estimate by two pennies. The company also provided earnings forecasts for both the fourth quarter and for the full year.
For the third quarter, net income attributable to Praxair dropped to $325 million or $1.04 per share from $355 million or $1.11 per share in the previous year.
The results of the latest quarter included a net post-tax benefit of $7 million, or $0.02 per share, resulting from a $306 million pre-tax charge and $313 million of income tax benefits, pertaining chiefly to a Brazilian government tax amnesty program.
Excluding items, earnings were $318 million or $1.02 a share. On average, 18 analysts polled by Thomson Reuters expected the company to report earnings of $1.00 per share for the third quarter. Analysts' estimates typically exclude special items.
Sales for the quarter decreased 20% to $2.29 billion from $2.85 billion, reflecting lower cost pass-through, decline in volumes and foreign exchange rate variations. Twelve analysts were expecting revenue of $2.30 billion for the third quarter.
Excluding the negative effects of foreign currency and cost pass-through, underlying sales dropped 9% because of 11% drop in volumes, partially offset by a 2% increase in overall pricing.
Region-wise, sales in North America for the quarter slid 25% year-over-year to $1.16 billion. Excluding the negative effect of currency and cost pass-through, underlying sales declined 12%. In Europe, sales shrank 16% to $323 million. Excluding translation losses, sales were 8% below the previous year, due to lower volumes in manufacturing and metals markets.
In South America, sales for the three-month period came down 17% to $436 million. Excluding currency effects, sales dipped 6% from the prior-year quarter. Sales in Asia declined 3% to $232 million from the corresponding quarter of fiscal 2008. Excluding currency translation effects, underlying sales advanced 3% year-over-year because of growth in on-site and liquid volumes in China, India, and Korea.
Praxair Surface Technologies recorded sales of $135 million, down from $145 million in the year-ago third quarter. Excluding currency effects and the sales contribution from the acquired Sermatech International Holdings Corp., sales declined 17% from the past year. The company noted that lower coatings volumes for industrial gas turbines and for general manufacturing markets in the U.S. and Europe more than offset the increase in coating volumes for jet engines and natural gas turbines.
However, the company has seen improved volume performance sequentially. Steve Angel, Praxair's Chief Executive, said, "Our base business volumes improved from the second quarter in all our geographic regions. The strongest pick-up was in Asia and South America, where government stimulus programs have increased domestic demand and industrial production. To a lesser extent, volumes in North America and Europe also improved from the 2009 second quarter, due primarily to increased production by our metals, chemicals and electronics customers. Overall demand from general manufacturing markets in these regions remains relatively weak and has yet to show meaningful signs of recovery."
Angel added that the company's cost curtailments and productivity programs significantly offset the impact of lower volumes. This has resulted in adjusted operating margin of 21% in the quarter, up from 19.1% in the prior year.
Operating profit for the quarter plunged to $174 million from $544 million last year. Adjusted operating profit was $480 million, 12% down from the past year.
For the nine-month period, net income attributable to Praxair decreased to $914 million or $2.93 per share from $1.01 billion or $3.15 per share in fiscal 2008. Sales declined sharply to $6.55 billion from $8.39 billion in the same period last year.
Looking ahead, for the fourth quarter, the company expects earnings per share in the range of $1.05 to $1.10. Analysts are expecting earnings of $1.07 per share on revenue of $2.35 billion.
For the full year, the company expects earnings of $3.98 - $4.03 per share on sales of about $9 billion. Praxair projects adjusted earnings to range between $3.96 and $4.01 a share. Analysts are currently looking for earnings of $3.96 per share on revenue of $8.90 billion for fiscal 2009.
Further, the company forecasts full-year capital expenditures of around $1.4 billion.
PX closed Tuesday's regular trading hours at $81.53 on the NYSE. In the past 52 weeks, the stock has traded between $47.40 and $85.24 per share.
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