Riding continued strong growth outside of the United States, automation vendors Emerson Electric and Invensys plc this week reported healthy revenue increases for their respective process management systems businesses, although executives from both companies said they expect to experience some slowing overall in 2008.
Emerson reported the stronger results, with overall sales for its fourth quarter, ended Sept. 30, 2007, of $6.13 billion, up 11% from sales of $5.5 billion a year earlier. The strong fourth-quarter results brought Emerson's full-year sales to $22.6 billion, up 12% from the $20.1 billion in sales the company reported for 2006.
Emerson's net fourth-quarter earnings of $623 million were up 18% over 2006 net earnings of $526 million. The company's full-year 2007 net earnings of $2.1 billion were 16% ahead of 2006 net earnings of $1.8 billion.
The 2007 results, noted Emerson CEO David Farr, followed a strong 2006 as Emerson enjoyed strong demand for its process automation products outside the United States and growing demand for new products such as wireless automation equipment.
"2006 and 2007 were like winning the World Series back to back," said Farr in remarks to financial analysts.
Emerson's process management group continued to be a star performer, with sales for the quarter growing by 18.7% to $1.7 billion. Emerson's process management business reported pre-tax earnings of $341 million for the quarter, up 17% compared with the year-earlier period.
Invensys, meanwhile, reported similarly strong results for its process systems business, although other parts of its operations depressed overall results for its second quarter, ended Sept. 30. Overall, Invensys reported second-quarter revenue of £543 million, up just 1.7% compared with £534 million in the like period a year ago. The company's earnings-per-share for the period of 3.3p fell 41.1% from the 5.3p earnings-per-share reported in the second quarter of last year.
The results brought Invensys' revenue for the first half to £1.06 billion, up slightly over the £1.04 billion in earnings reported in the first half of fiscal 2007.
Like Emerson, Invensys reported strong results from its process systems group. Sales from process systems in the second quarter grew 8% to £205 million, compared with the £190 million on process systems sales that Invensys reported in the like period a year ago. Invensys' process systems group reported an operating profit of £26 million, up 13% from the like period a year ago.
Invensys' Infusion product line, in particular, began to help the company's results during the quarter. In the 18 months since launching the product, the company has received $200 million in Infusion orders, said CEO Ulf Henriksson.
Invensys' results were pulled down by other parts of the business, including its controls products. Demand for controls products was reduced by a slowdown in residential construction industries in the United States, Henriksson said. Invensys also had £5 million in restructuring charges during the second quarter.
Executives from both Invensys and Emerson said they see some slowing of their businesses due to global economic trends.
"The economic winds are changing," Emerson's Farr said. "2008 will be good, but less than 2007." Farr said Emerson expects revenue growth of 5% to 7% in 2008. He said earnings per share are expected to increase in the range of 10% to 15%.
In the same vein, Invensys' Henriksson said his company is beginning to see some delays in process systems orders, some due to customers' experiencing a shortage of construction materials.
Executives from both companies also said they expect to engage in additional acquisitions during the year. Emerson's Farr said his company is targeting its process management and network power businesses for acquisitions in 2008.