Donaldson Co. Inc. (DCI), which makes engine and filtration products, reported Wednesday that second quarter profit declined from last year, hurt mainly by foreign currency translation, and weak performance in both of its segments. The company also lowered its financial outlook for fiscal 2009. Following the news, the shares lost 8% in the after-hours trading.
Net income for the second quarter was $33.8 million or $0.43 per share, slightly lower than net income of $34.1 million or $0.42 per share in the prior year quarter. On average, 9 analysts polled by Thomson Reuters expected the company to earn $0.42 per share for the second quarter. Analysts' estimate typically excludes special items.
Net earnings, excluding foreign currency translation, grew to $35.4 million from $30.6 million in the year-ago quarter.
The Minneapolis, Minnesota-based company's sales declined to $460.6 million from $511.8 million in the same quarter of last year. Six analysts had a consensus revenue estimate of $502.09 million for the second quarter.
The company noted that the impact of foreign currency translation decreased reported sales by $24.2 million or 4.7% in the quarter. Net sales, excluding foreign currency translation, rose to $484.8 million from $484.7 million in the previous year quarter.
Bill Cook, chairman, president and CEO, said, "The drop in our sales volume was widespread, particularly in our Engine Products segment. We did see continued strong sales in our aerospace and defense, retrofit emissions, and gas turbine businesses, which helped to offset the weaknesses in our other end markets."
Engine products segment's second quarter sales fell to $242.1 million, while sales from industrial products segment declined to $218.5 million over a year earlier.
Local currency sales decreased 14% in Asia and 7% in Europe, while sales in the Americas were flat compared to last year.
As a percentage of sales, gross margin decreased to 29.1% from 31.9% in the previous year quarter.
In addition, Donaldson, which already reduced 1,850 jobs since the beginning of this fiscal year, said it will undergo additional restructuring actions in the third quarter. The company expects that the combination of its restructuring actions to date together with those still planned will save about $85 million.
As part of its restructuring actions, the company said it expects to reduce its executive officer compensation by 30% to 50% this year. Already, the company's officer base salaries have been frozen at January 2008 levels.
For the first half of fiscal 2009, Donaldson reported net income of $81.8 million or $1.03 per share, up from $77.4 million or $0.95 per share in the previous year period.
Net earnings, excluding foreign currency translation, rose to $83.7 million from $70.6 million in the prior year period.
Sales for the year-to-date period were $1.034 billion, down from $1.037 billion in the preceding year period. Net sales, excluding foreign currency translation, were $1.1 billion, up from $989.7 million last year.
For fiscal 2009, Donaldson now expects earnings of $1.70 to $1.90 per share, and sales of $1.9 billion to $2.0 billion. Foreign currency translation is expected to account for about 40% of this decrease. Street expects earnings of $2.12 per share on revenue of $2.19 billion for the year.
Earlier, the company estimated earnings of $2.16 to $2.36 per share, and sales of $2.15 billion to $2.23 billion for 2009.
DCI closed Wednesday's regular trading session at $28.26, down 44 cents or 1.53%. In the after-hours, the shares further lost $2.26 or 8.00%.
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