Rockwell Automation reported record revenues for fiscal 2005, the result of double-digit organic growth, an expanded presence in key international markets and better alignment of its global business processes with corporate goals, company officials said.
For fiscal 2005, Rockwell reported income of $540 million on sales of $5 billion. This compares with earnings of $414.9 million on $4.4 billion in revenue for 2004, the Milwaukee-based automation vendor said.
"This was a year in which we did what we said we would do," said Rockwell Chairman and CEO Keith Nosbusch during an analyst briefing. "It exceeded all our financial targets and we executed against growth and productivity initiatives."
Rockwell's upbeat financial results follow similar proclamations from control systems competitors ABB, Inc. (click here for details) and Emerson Electric (click here for details).
Net income for the fourth quarter was $129.3 million on revenues of $1.3 billion, which includes discontinued operations (the sale of the FirstPoint Contact business). This compared with net profits of $148 million on sales of $1.2 billion in the like period last year.
Sales for Rockwell's two core divisions -- Power Systems and Control Systems -- were up 11% in the quarter, year over year. Control Systems, however, accounted for the majority of revenue in fiscal 2005, bringing $4.12 billion to the company's top line.
Strong demand from mining and energy companies generated $879.6 million in Control Systems sales for the year, Nosbusch said, noting that the division's Logix control architecture and intelligent motor control are the business' growth engines.
According to Rockwell CFO James Gelly, the Control Systems group experienced organic growth of 10.5% year over year. International sales grew 8% organically, primarily from Latin America and Asia Pacific regions (as Europe remains weak), and sales of the Logix platform were up 30% from the year-earlier period.
"What's hitting the numbers today is really Logix," said Craig Resnick, an analyst with ARC Advisory Group (Dedham, MA). "It gets into the fact that the users continue to pound the automation suppliers for multi-discipline controllers. Companies that offer PAC [programmable automation controllers] type of solutions are experiencing sales growth in that segment."
But beyond having the right products, having the right leadership, namely Nosbusch, is an important element in the company's success, Resnick remarked. "Keith was one of the driving forces in the company behind Logix," Resnick pointed out. "He was the right person for the job [partly] because of the fact there is demand in the marketplace for this multi-discipline platform, which is their flagship product, and he is the right person to advance the cause."
Aside from understanding the significance of Logix to the customer base, Nosbusch has also kept the company on course since he took Rockwell's reins almost two years ago. For example, the company has spent $124 million on IT systems this year in an effort to streamline processes globally.
"The IT Systems investments are investments in straightening out business processes, making them the same everywhere," said Gelly. "It is moving from what I consider to be a strong culture on the manufacturing side, lean manufacturing and Six Sigma -- migrating where products are manufactured and continuing to look at globalization -- to the administrative areas ... finding the back office, doing more with less, common processes, shared services and so forth."
Gelly and Nosbusch offered few specifics on 2006 growth projections, noting that an investors' conference scheduled to take place in 10 days will offer detailed financial guidance. Rockwell officials did say the company expects another good year as it continues to boost its productivity in-house and executes on new opportunities in the Power Systems business that are resulting from the higher cost of energy.
"There's no question that the continued high cost of energy has sensitized our customer base to that dimension of their cost structure," Nosbusch said in the briefing. "It has created a lot of interest -- not business -- but renewed interest in helping customers find ways to reduce energy cost. Our biggest utilization of energy tends to be around the power-centric part of the portfolio. Energy efficient motors, variable speed drives, and the ability to help them understand how to utilize energy through consulting and doing audits of energy utilization ... all those parts of the portfolio are engaged in working with customers to find ways to help them reduce energy cost that has heightened in U.S. ... and in China over last 12 to 18 months as their energy appetite continues to grow and they can't bring enough resources on-line fast enough. In the long run it will be positive for the power-centric business."