Emerson's fiscal 1Q02 earnings down 28.5%; process control sales up 3%
St. Louis, Mo. - Emerson announced Feb. 5 that its net earnings decreased 28.5% to $255 million in first quarter fiscal 2002 from $357 million in first quarter fiscal 2001.
St. Louis, Mo. - Emerson announced Feb. 5 that its net earnings decreased 28.5% to $255 million in first quarter fiscal 2002 from $357 million in first quarter fiscal 2001. Sales also declined 15% to $3.3 billion from $3.9 billion; earnings per share decreased 26.5% to $0.61 from $0.83; and operating cash flow declined 9% to $252 million from $277 million during the same period.
Meanwhile, the company's free cash flow increased 25% from $127 million in fiscal 1Q01 to $158 million in fiscal 1Q02. Emerson reports this gains was caused by improvements in working capital and lower capital spending.
'The first quarter was challenging due to weak economic conditions and the actions of key customers, who reduced their inventories and production. However, we have seen evidence of stabilization across many of our early-cycle businesses, and are optimistic we will see steady improvement in business conditions as the year progresses,' says David Farr, Emerson's ceo. 'Important early indicators include our consumer-based tools and appliance businesses, which have shown solid results since early December. In the electronics and telecommunications business, embedded power conversion products, which were an early indicator of the telecom and computing downturn, have also been relatively stable for several weeks.
'In addition, the process business has continued to perform well on top of an outstanding 2001 performance, driven by our industry-leading PlantWeb technology. Our major emphasis continues to be on implementing restructuring actions for cost structure improvements. We are reducing salaried headcount, closing and consolidating facilities, and discontinuing certain product areas that have not met growth and profitability expectations. At the same time, we have continued to fund important long-term growth initiatives, including using this downturn to extend our leadership in key technologies.'
Mr. Farr reported that Emerson's process control business achieved a 3% increase in sales, reaching $796 million. Underlying growth, excluding acquisitions, divestitures and unfavorable currency exchange, was approximately 5%, building on 10% growth achieved in fiscal 2001. The company's PlantWeb digital plant architecture continues to gain acceptance, with more than 2,200 project wins in the oil and gas, pharmaceutical, chemical, pulp and paper, and food and beverage industries. This past December, Emerson Process Management was awarded two major contracts, totaling over $25 million each, including a $32-million, multi-stage automation upgrade of the Shell Deer Park refinery.
Meanwhile, sales in Emerson's industrial automation business declined from $753 million to $656 million in fiscal 1Q02, driven by continued weakness in capital goods in the U.S. and Europe. During the quarter, Emerson divested its Chromalox industrial heating products division, which resulted in a pretax gain of $85 million. This gain was reportedly offset by ongoing costs for rationalizing operations and other items.
'Despite the economic environment, Emerson continues to be financially strong,' adds Mr. Farr. 'The 25% increase in free cash flow indicates the successes we're achieving in lean manufacturing and e-business productivity. The reduction of capital spending to under $100 million for the quarter was also an important driver of cash flow growth. The company's balance sheet also remains solid. Net debt to net capital was approximately 44% at the end of the quarter, with interest coverage at 6.3 times. Solid cash generation and lower levels of acquisitions and stock repurchase throughout the remainder of 2002 are expected to decrease our debt position.'