Earnings Roundup: 3M, Kennametal and Cooper Industries

Industrial Distribution staff -- Industrial Distribution, 4/24/2008 7:26:00 AM

3M Corp.

First-quarter sales for 3M rose 8.9 percent to $6.46 billion, compared with $5.94 billion during the same period last year.

Net income for the St. Paul, Minn.-based industrial conglomerate slid 27.8 percent to $988 million, compared with $1.37 billion during the first quarter of 2007.

3M said the sale of its European pharmaceuticals business earned a net gain of $422 million during the first quarter of 2007; excluding that gain, net income for the first quarter of 2008 rose 4.4 percent.

“Two-thirds of our sales came from our international subsidiaries and growth in many developing economies enabled us to overcome economic challenges in the U.S. and to fund investments to secure the future of our enduring franchises,” chairman, president and CEO George Buckley said. “While economic conditions are uncertain, we remain focused on critical growth drivers, including 3M’s world-renowned research and development capability, continued investment in our many enduring franchises, strategic acquisitions and new manufacturing plants that will improve our ability to serve customers.”

3m said it expects full-year earnings to increase by at least 10 percent in 2008.

Kennametal

Kennametal posted third-quarter sales of $689.7 million, up 12 percent compared with $615.9 million during the same period last year.

Net income for the Latrobe, Pa.-based tooling, engineered components and advanced materials manufacturer slipped 55.2 percent to $23.2 million, compared with $51.7 million during the third quarter of 2007.

Kennametal said the income results include a $35 million charge related to goodwill and other intangible assets for its surface finishing machines and service business. Absent that charge, net income rose 12.4 percent.

“Our global growth strategies and initiatives continued to deliver results as we grew sales in both of our business segments at a solid pace in the March quarter. The team achieved this growth despite reduced industrial activity in North America and in some market sectors,” chairman, president and CEO Carlos Cardoso said, noting “robust improvement” in the operating margin of the company’s metalworking business.

“Our advanced materials business, however, was challenged during the quarter by continued slower conditions in certain markets, higher raw materials costs, plus lower performance and an impairment charge in our surface finishing machines and services business," Cardoso said.

Kennametal said it plans to reduce costs and improve efficiency over the next 12 to 18 months by consolidating some manufacturing and service operations “as well as other employment and cost reduction programs.” The restructuring, which is aimed at annual savings of up to $25 million, is expected to cost $40 million to $50 million during that time.

The company said it expects sales to rise 13 percent during the fourth quarter and the full year and an earnings increase of up to 21 percent for fiscal 2008.

Cooper Industries

Cooper reported first-quarter sales of $1.55 billion, up 10.9 percent compared with $1.39 billion during the same period last year.

Net income for the Houston-based electrical products manufacturer rose 16.3 percent to $153.4 million, compared with $131.9 million during the first quarter of 2007.

“Our significant exposure to the energy and global project infrastructure markets, as well as increasing investment in faster growing, higher-margin platforms, allowed us to deliver solid top-line growth and double-digit earnings growth. Despite the loss of a large distribution center from a tornado and restructuring costs in our Cooper Tools business, we delivered 14 percent recurring [earnings-per-share] growth. Core revenue growth was supplemented by acquisitions, which contributed slightly more than 6 percent, as well as currency translation, which contributed almost 3 percent,” chairman and CEO Kirk Hachigian said.

Cooper said it spent $266.4 million buying back 6.3 million shares of its own stock during the quarter.

“While there continues to be considerable uncertainty in the U.S. economy, we have a diversified portfolio and have demonstrated the ability to execute upon our strategic initiatives,” Hachigian said. “For 2008, we are now forecasting earnings per share to increase 12 to 16 percent … with revenue gains in the range of 10 to 13 percent. For the second quarter of 2008, inclusive of expected acquisition integration and reorganization costs in the tools segment, we expect earnings per share to increase 10 to 15 percent with revenue gains in the range of 12 to 15 percent.”