Filtration systems maker Donaldson Co. Inc. (DCI), Tuesday said its fourth quarter profit declined by 51.5% from last year, hurt by restructuring expenses, and the negative impact of foreign currency translation. In addition, the company also provided financial outlook for fiscal 2010, which failed to meet the Street consensus.
The Minneapolis, Minnesota-based company posted net earnings of $23.6 million for the fourth quarter, down 51.5% from $48.6 million in the prior year quarter. Earnings per share dropped 50.0% to %0.30 from $0.60 in the previous year quarter.
Result for the quarter included pre-tax restructuring expenses of $6.7 million, which reduced earnings by $0.05 per share in the quarter. Excluding the impact of these restructuring expenses, earnings were $0.35 per share for the quarter. On average, 9 analysts polled by Thomson Reuters expected the company to report earnings of $0.30 per share for the fourth quarter. Analysts' estimates typically exclude special items.
Fourth quarter net sales declined 30.6% to $421.3 million from $607.4 million in the same quarter last year. The company noted that the impact of foreign currency translation decreased reported sales by $22.6 million, or 3.7% in the quarter. Six analysts had a consensus revenue estimate of $407.45 million for the fourth quarter.
Segment wise, total Engine Products segment which includes Off-road products, Transportation products and Aftermarket products reported quarterly net sales of $227.3 million, down from $326.7 million in the comparable period last year.
Total Industrial products segment that includes Industrial Filtration Solutions products, Gas Turbine products and Special Application products reported quarterly net sales of $194.0 million, down from $280.7 million in the similar period last year.
As a percentage of sales, gross margin for the fourth quarter decreased to 32.8% from 33.2% in the previous year quarter, hurt by lower absorption of fixed costs due to the drop in production volumes, and additional restructuring costs.
Donaldson said it continued working on restructuring plans but did not complete all of its anticipated actions by the end of the quarter. Unfortunately, these restructuring actions included further work force reductions of 100 employees in our fourth quarter, for a total work force reduction of 2,800, or 21% since the beginning of fiscal year.
From these actions, the company realized savings of about $23 million in the quarter. The company anticipates that the cumulative effect of the restructuring actions completed in fiscal 2009 will generate over $100 million of annualized cost savings at its current sales levels.
For fiscal 2009, Donaldson reported net earnings of $131.9 million or $1.67 per share, compared to $172.0 million or $2.12 per share in the year-ago. Excluding the restructuring expenses, earnings were $1.82 per share for the year.
Annual net sales declined 16.3% to $1.87 billion from $2.23 billion in the previous year.
Analysts expected earnings of $1.67 per share on revenue of $1.86 billion for the year.
For fiscal 2010, Donaldson anticipates earnings of $1.32 to $1.52 per share, and earnings, excluding restructuring charges, of $1.44 to $1.64 per share. Sales are expected in the range of $1.65 billion to $1.75 billion. Street estimates the company to report earnings of $1.65 per share on revenue of $1.80 billion for the year 2010.
Among others in the industry, Columbus, Indiana-based engine and power generation equipment maker Cummins Inc. (CMI) reported an 81% drop in profit for the second quarter from last year, hurt by sharply lower demand for engines and power-generating equipment amid the global recession. Looking ahead, the company reiterated its earnings and sales outlook for fiscal year 2009 even though it said it does not see any recovery in its markets during the year.
Donaldson closed Tuesday's regular trading session at $36.93, down 64 cents or 1.70%. In the after-hours, the shares further lost $1.37 or 3.71%.
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