Honeywell today announced year-over-year declines in its second-quarter sales and earnings, in keeping with its own expectations as the recession continued to muffle new business.
The automation vendor posted $7.57 billion in sales, 22% below the $9.67 billion recorded a year ago. Net income fell 37% to $460 million in the quarter ended June 30, from $728 million the year before. Product sales totaled $5.8 billion, down 26% from a year earlier, and services brought in $1.8 billion, down only 4% from a year earlier. The company found a ray of light in all this: Its cash flow from operations was $1.13 billion, vs. $1.04 billion in the 2008 second quarter, and its free cash flow — cash from operations less capital expenditures — increased to $1 billion from $853 million.
In a statement announcing the financial results, Honeywell Chairman and CEO Dave Cote pointed to the free cash flow figure as demonstration of the company’s ability to manage “working capital in these very dynamic market conditions.” He also noted a $400 million agreement to acquire RMG Group, a Germany-based provider of natural gas measuring and control products and services, which is expected to boost Honeywell’s Process Solutions business.
In the quarter, sales in the Automation and Control Solutions business, of which Process Solutions is a part, were down 17% to $3.01 billion, from $3.62 billion a year ago. The company said the favorable impact of acquisitions and divestitures partially offset lower volumes and unfavorable currency exchange rates. The segment’s profit, nevertheless, declined 11% year over year, to $346 million from $390 million.
Despite the declines, ACS performed better than any of Honeywell’s other business units, with Transportation making the poorest showing with sales dropping 41% and profit plummeting 83%.
“Economic conditions … remain challenging and we are not planning for any recovery in 2009,” Cote said. “Our key process initiatives, such as the Honeywell Operating System, Velocity Product Development, and Functional Transformation, are enabling the aggressive, company-wide repositioning and cost actions that will help Honeywell continue to deliver earnings and free cash flow in this tough environment.”
The company lowered its full-year sales forecast to roughly $31.5 billion from the $32.3 billion cited in April. Its current earnings expectation of roughly $2.85 per share is at the low end of the previously stated earnings range.
Honeywell’s results follow by just a few days a grim report from automation rival ABB, which last week reported revenue and profit declines, as well as staff cuts, in its second quarter. “I can’t call the bottom of a market in our business right now,” CEO Joe Hogan told journalists on a conference call.