ST. LOUIS--(BUSINESS WIRE)--Nov 4, 2014--Emerson (NYSE: EMR) has announced that net sales in fiscal 2014 declined less than 1 percent, as 3 percent underlying sales growth and 1 percent contribution from acquisitions was offset by divestitures. Growth was led by a 6 percent increase in Climate Technologies and 7 percent growth in Process Management. Global business conditions remained sluggish, as the low-single-digit growth macroeconomic environment continued for a third consecutive year. Growth in the U.S., up over 4 percent, and China, up 7 percent, combined to contribute over 80 percent of the total underlying sales increase, as geopolitical instability and structural challenges limited growth in several emerging markets and in Europe.
Profitability reached new highs as gross profit margin expanded 110 basis points to 41.4 percent, reflecting more favorable business and technology mix flowing through to record segment margin.
Operating cash flow of $3.7 billion surpassed last year's record level and outperformed expectations.
"Operationally, we closed 2014 with a strong finish, as profitability, earnings growth and cash generation met or exceeded our targets communicated at the start of the year," said Chairman and Chief Executive Officer David N. Farr. "Once again, global business investment struggled to sustain momentum, with growth fading through the year as economic uncertainty increased. I am very pleased with how we executed in this environment, delivering solid results while maintaining our strategic investment programs to continue to position Emerson for stronger long-term growth and enhance shareholder value."
Business Segment Highlights
Process Management net sales grew 8 percent in the quarter, with underlying sales up 5 percent, supported by continued strength in global energy and chemical markets. Growth was strongest in North America, up 13 percent, as investments in oil and gas production and processing projects remained robust. Market conditions were mixed in Asia, up 1 percent, as strength in Southeast Asia and India was balanced by declines in Australia and China on challenging comparisons. Europe was flat, with improvement in Russia offset by project timing in the North Sea region. Segment margin expanded 130 basis points to 25.3 percent, benefiting from significant favorable currency comparisons. Recent order trends have been robust, with growth of 12 percent in the quarter, excluding 9 percent unfavorable currency translation, reflecting resilience of global energy investments and providing strong momentum into next year.
Industrial Automation sales increased 5 percent in the quarter, as demand for capital goods improved but remained mixed across markets, with North America up 12 percent, Asia up 5 percent, and Europe down 2 percent. Growth was led by the HVAC-related hermetic motors business, up over 20 percent, with strength in electrical distribution as well. All businesses grew except for motors and drives, which declined slightly, reflecting recent weakness in Europe. Segment margin improved 60 basis points to 18.1 percent. Varied market conditions are expected in the near term, as favorable momentum in North America and Asia continues, while weakening economic trends in Europe are discouraging.
2015 Outlook
Strong underlying orders, up 9 percent in the quarter, and record year-end backlog of $6.7 billion support the outlook for improved underlying sales growth in the near term. Global macroeconomic trends are mixed but gradually improving, with solid momentum in the NAFTA region and China balanced by increasing uncertainty in Europe and some emerging markets. Based on current conditions, underlying sales are expected to grow between 4 and 5 percent next year, better than in 2014, with unfavorable currency translation and the potential power transmission divestiture deducting 2 percent each, for a reported sales change of 0 to 1 percent. Profitability is expected to continue to improve modestly.
"Global business investment continues to be stubbornly slow, as several economies struggle to institute the critical reforms required for sustained growth," Farr said. "As such, we are planning conservatively for a 3 to 4 percent global gross fixed investment growth environment. The accelerated growth investments are starting to generate solid returns, as seen in our strong order trends, which will help drive improved underlying growth next year despite the absence of better economics. I am encouraged by the progress on our strategic initiatives across the businesses that continue to strengthen our position for long-term value creation."
