Eaton says that in the second quarter it will be restructuring its industrial segment, which could mean the loss of an unspecified amount of jobs. The industrial sector includes hydraulics, vehicle, and aerospace units.
In a conference call with financial analysts after releasing the operating results for the first quarter, CEO Alexander “Sandy” Cutler did not specify the number of employees who would be affected.
“We take these actions when we think it is right within our businesses and we've done the right preparation, and that always takes some time, and frankly, we're not all the way through them, which is why we're not sharing them in terms of how much is in each individual business,” Cutler said.
He later went on to say the restructuring was not just based on Eaton’s sales volumes being lower than anticipated, but what is happening in the world economy.
“When we look at the world’s GDP, certainly the world is experiencing what I call some growth anxieties, whether people are worried about the China market not materializing as strongly, or the Ukrainian impact potentially in Europe, or the political elections in India, or the U.S. economy showing different degrees of growth in different sectors. We just felt it was prudent to go ahead and get going on this,” he said according to a transcript of the call as provided by www.seekingalpha.com.
Eaton’s hydraulics segment sales were $782 million, an increase of 3% over the first quarter of 2013. Operating profits in the first quarter were $108 million. Excluding acquisition integration charges of $4 million, operating profits were $112 million, an increase of 24%.
“The hydraulics markets in the first quarter of 2014 grew modestly over the first quarter of 2013,” said Cutler. Bookings in the quarter increased 9 percent over the first quarter of 2013.
Earlier this week, Eaton completed the sale of its Aerospace Power Distribution Management Solutions and Integrated Cockpit Solutions business to Safran for $270 million. The transaction was announced on January 20.
The Aerospace Power Distribution Management Solutions and Integrated Cockpit Solutions business employs approximately 350 people at manufacturing facilities in Costa Mesa, California and Sarasota, Florida. The business produces illuminated switches, cockpit panel assemblies, pilot controls, and passenger safety unit latches, as well as circuit protection, power distribution and switch components, and sub-systems for aerospace and industrial applications. Sales were approximately $102 million in 2013.
Eaton’s total sales in the first quarter were $5.5 billion, 3.5% above the same period in 2013. Operating earnings for the first quarter of 2014, excluding pre-tax charges of $66 million to integrate recent acquisitions, were $483 million, an increase of 21% over 2013.
Cutler said that the company’s first quarter results are a solid start to the year, coming in slightly above the midpoint of its range in spite of the negative impact from the severe winter weather in North America.
“Our 3.5% percent sales growth in the first quarter consisted of a healthy increase of 4.5% in core sales, partially offset by a 1% decline from currency translation,” said Cutler.
“We entered 2014 expecting it would be a year of modest global economic growth, leading to 3% growth in our markets,” he said. “We continue to believe our markets will grow 3% in 2014.”