Despite a credit crunch and other macro-economic trends driving financial uncertainty in the manufacturing industry, sales at Rockwell Automation remained on the upswing in its fiscal 2008 first quarter, the company reported today.
Sales in Rockwell's first quarter, ended Dec. 31, 2007, soared 16% over the year-ago quarter to $1.3 billion, yielding $156.6 million in income. That translated into earnings per share (EPS) of $1.04, a 37% year-over-year improvement and in line with the company's expectations, officials said.
The company's process business is experiencing the most growth, propelled by strong demand in the life sciences and oil and gas industries. Meanwhile, the automotive industry has shifted into low gear as project spending scales back, especially in the U.S. car market, officials said.
Worldwide, however, the automotive industry is on a growth path, said Keith Nosbusch, Rockwell's chairman and CEO, on a call this morning with financial analysts. He predicted that the recent partnership between Rockwell and Dassault Systemes would fuel future spending in this industry.
Late last year, the two companies announced a technology agreement that links Rockwell's Logix control technology with Dassault's PLM software to create a digital manufacturing environment that aims to cut weeks out of the engineering, design, and production cycles.
"We are excited about this as a time-to-market enhancer for our customers," Nosbusch said on the call. But he explained that this will take time to pay dividends. "Really, this is something that tends to play out as part of new model designs as opposed to installed base designs. That's why it will take a little longer. It has to be at the front end of the design cycle, which tends to [take a] couple of years."
Similarly, Rockwell expects its Architecture & Software business, which accounted for $577 million in revenue in the first quarter (an increase of 9% year over year), to eventually have a higher organic growth rate than its Control Product & Solutions group, which pulled in $754 million in sales this quarter (a 22% increase over 2007).
In the near term, however, CP&S remains the fastest growing segment due to Rockwell's aggressive expansion into new geographies and a strategy to build out its core competency in the process industries.
"As we go into plant-wide process control, customers historically treat that as a solution," Nosbusch said in an interview with Managing Automation. In addition, 50% of Rockwell's business is now outside the United States, with major growth occurring in Europe, Latin America, and Asia Pacific.
"As we grow more outside the U.S., customers need more solutions from automation suppliers because [often] there is not [the same] infrastructure in emerging economies ... for example, system integrators don't exist as readily in emerging markets. As we grow more internationally in emerging markets, there's a natural impetus [for us] to grow solutions faster," he said.
For that reason, Nosbusch expects that eventually the company will conduct more of its business outside of the United States. He envisions a time — perhaps in another five years or so — when the ratio will be 40:60. But he emphasizes that it's not something to expect in the near term.
Instead, Nosbusch is focusing on short-term financial growth. "Today, Q2 is shaping up to be another solid quarter," he told analysts. He also reaffirmed Rockwell's full-year guidance. The company projects revenue growth of 10% to 12% and a diluted EPS of $4.25 to $4.45.
"We continue to carefully monitor numerous economic indicators and the potential impact on global customer demand. If we notice changes in demand, it may cause us to modify the outlook ... but, for now, business conditions in the industrial sector remain stable," Nosbusch said.