Manufacturing conglomerate Honeywell reported its 2020 first quarter financial results on Friday, showing that a surge in demand for its personal protective products wasn’t enough to offset lower demand in other market verticals of its business.
The Charlotte, NC-based company posted total Q1 sales of $8.5 billion, down approximately 5 percent year-over-year (YoY), with organic sales down 4 percent. Operating profit margin of 20.0 percent improved 150 base points from a year earlier, while total profit of $1.61 billion grew from $1.42 billion of a year earlier.
“As the COVID-19 pandemic rapidly escalated and the global economy deteriorated, we faced headwinds across our businesses, including rapid changes in our supply chain, constraints at customer sites, and significant impacts on the commercial aerospace and oil and gas end markets,” said Darius Adamczyk, Honeywell chairman and CEO. “These challenges drove an organic sales decline in the quarter.”
By business segment in Q1:
Aerospace sales of $3.36 billion increased approximately 1 percent YoY, with organic sales up 1 percent, driven by continued strength in the Defense and Space business and growth in air transport commercial aftermarket. Segment profit increased 12 percent to $937 million on profit margin of 27.9 percent.
Performance Materials and Technologies sales of $2.40 billion decreased 7 percent YoY, with organic sales down 5 percent, driven by supply chain disruptions and decreased products demand in Process Solutions. Segment profit fell 9 percent to $512 million on profit margin of 21.4 percent.
Safety and Productivity Solutions sales of $1.42 billion fell 10 percent YoY, with organic sales down 9 percent, driven by lower sales volumes in sensing and IoT, impact of major systems project timing in the Intelligrated brand and lower demand for gas sensing products. Segment profit fell 16 percent to $178 million on profit margin of 12.5 percent.
Honeywell Building Technologies sales of $1.28 billion decreased 8 percent YoY, with organic sales down 6 percent, driven by softness in building solutions projects and volume declines in security and building management products. Segment profit dipped 3 percent to $252 million on profit margin of 20.5 percent.
Honeywell expects its 2020 Q2 sales to be down approximately 15 percent YoY.
Honeywell said it has implemented cost controls that are expected to produce savings of $1.1 billion to $1.3 billion in 2020, with actions including the following:
- Reduced discretionary expenses (non-essential travel, contractors, consultants, hiring)
- Canceled annual merit-based pay increases; reduced executive and board of director salaries
- Reduced work schedules company-wide to adapt to lower demand
- Targeted permanent census reduction, varied by business