Sauer-Danfoss Inc. has announced its financial results for the fourth quarter ended December 31, 2011.
Fourth Quarter Review
Net sales for the fourth quarter increased 4% to $446.1 million, compared to net sales of $428.9 million for the fourth quarter of 2010. Sales for the fourth quarter increased 19% in the Americas, 9% in Europe, but declined 30% in the Asia-Pacific region, excluding the impact of changes in currency translation rates. Sales increased 16% in the Controls segment, 4% in the Propel segment, and were level in the Work Function and Stand-Alone Businesses segments, excluding the impact of changes in currency translation rates.
The company reported net income of $27.4 million, or $0.57 per share, for the fourth quarter of 2011, compared to net income of $126.0 million, or $2.60 per share, for the fourth quarter of 2010. Fourth quarter 2011 results were favorably impacted by $9.2 million, or $0.19 per share, related to the reversal of deferred tax asset valuation allowances. Results for fourth quarter 2011 were negatively impacted by certain product field recall costs of $6.9 million, or $0.10 per share. Fourth quarter 2010 results were favorably impacted by $82.8 million, or $1.71 per share, related to the reversal of deferred tax asset valuation allowances.
Sven Ruder, President and Chief Executive Officer, comments, "Our fourth quarter sales and earnings came in as expected. While sales growth in the Americas is holding strong, we are seeing sales growth slow in Europe and our sales in Asia-Pacific fell substantially. The drop in sales in Asia-Pacific is due to a sharp fall in our sales in China, driven by the Chinese government's tightening of monetary policy to rein in inflation. We were hit hard in China as our current mix of business is concentrated in the construction and road building markets which have been particularity impacted by the government's monetary policies. We continue to believe the underlying, long-term growth drivers in China are compelling and the current sales decline is temporary.
"Our operating earnings were down for the quarter," continues Ruder. "This was primarily driven by our increased investments in China and in research and development while sales growth slowed considerably. In addition, we incurred costs of $5.4 million related to the restructuring of our European sales and marketing organization and the implementation of SAP in our Brazilian operations. These investments and restructurings, while impacting our earnings in the current quarter, will drive our future growth in sales and earnings."
Backlog Remains Strong
The company received new orders of $456.5 million for the fourth quarter of 2011, a 21% decrease compared to fourth quarter 2010 orders of $577.7 million.
Total backlog at December 31, 2011, was $939.8 million, a 15% increase compared to the same period last year of $814.2 million.
Twelve Month Review
The company reported net sales for the 12 months ended December 31, 2011, of $2,057.5 million, an increase of 25% compared to net sales of $1,640.6 million for the 12 months of 2010. Net sales for the 12 months of 2011 increased 21% over the prior year period, excluding the impact of currency translation rate changes.
Net income for the full year 2011 was $229.9 million, or $4.74 per share, compared to net income of $213.4 million, or $4.40 per share, for the same period last year. 2011 results were favorably impacted by $22.9 million, or $0.47 per share, relating to the reversal of deferred tax asset valuation allowances. Full year 2010 results were favorably impacted by $101.6 million, or $2.10 per share, related to the reversal of deferred tax asset valuation allowances.
Record Cash Flow
Cash flow from operations for full year 2011 was a record $374.2 million compared to $269.3 million for full year 2010. Capital expenditures for full year 2011 were $51.8 million compared to $26.2 million for the same period last year. The company is now in a net cash position of $50.8 million at December 31, 2011, having reduced debt, net of cash, by $287.3 million during the 12 months of 2011.
Outlook for 2012
Ruder concludes, "We move into 2012 with caution. While our sales in the Americas remain strong, the situation in Europe is uncertain, with many economists forecasting a mild recession. Business activity in China remains at a very low level. We continue to hear of loosening up, but are still to see any new financing to impact our markets and subsequently our business. At best we see growth returning to the Chinese markets where we are active in the middle of the second quarter. Therefore, we are forecasting little sales growth for the coming year. Our outlook on earnings is driven by the low sales growth we expect for the coming 12 months. Also keep in mind that 2011 earnings were benefited by $23 million related to the reversal of deferred tax asset valuation allowances, or $0.47 per share. There are no further valuation allowances to benefit 2012 earnings, and we will return to a more normal tax rate."
The outlook for 2012 is as follows:
- Annual sales growth of 0 to 10% from 2011 levels
- Expected earnings in the range of $4.00 to $5.00 per share
- Capital expenditures of approximately $70.0 to $80.0 million