The Timken Company reported sales of $1.3 billion in the first quarter of 2011, an increase of 37% over the same period a year ago. The sales increase reflects stronger global demand across most of the company's end markets as well as higher material surcharges and pricing.
The company generated record first-quarter income from continuing operations of $112.7 million, or $1.13 per diluted share, net of non-controlling interest, compared with $28.3 million, or $0.29 per share a year ago.
The improvement in first-quarter earnings reflects increased demand and favorable mix, as well as surcharges and pricing. Together, they more than offset year-over-year increases in material costs and selling and administrative expenses.
"Timken's first-quarter results set the company on pace to achieve record earnings this year, and demonstrate that our strategic work over the past few years to transform the company is serving us well," says James W. Griffith, Timken president and chief executive officer. "We are driving productivity, capacity improvements and new product introductions to serve growing demand from our customers around the world."
At quarter-end, total debt was $522.4 million, or 20.2% of capital. As of March 31, 2011, the company had cash of $637.6 million, or $115.2 million in excess of total debt, compared with a net cash position of $363.4 million as of Dec. 31, 2010. The change reflects higher working capital requirements of approximately $175 million to support increased demand, as well as discretionary pension contributions of $150 million, which were partially offset by strong earnings.
Among recent developments, the company:
- Announced a $35 million investment to install an in-line forge press at the Faircrest Steel Plant in Canton, Ohio
- Accelerated capacity expansions in Asia, including its Chennai, India, plant and its plants in Wuxi and Xiangtan, China
- Announced planned productivity improvements across its steel plants to achieve a 120,000-ton capacity increase.
Mobile Industries Segment Results
In the first quarter, Mobile Industries' sales were $443 million, up 21% from last year's first-quarter sales of $367.5 million. Higher demand across all of the segment's end markets drove the increase, led by the off-highway and rail sectors.
EBIT for the segment was $68 million for the first quarter, up from $39.6 million in the same period a year ago. Improvements in volume and manufacturing utilization accounted for most of the increase.
Process Industries Segment Results
Process Industries' first-quarter sales were $285 million, up 38% from $206.6 million for the same period a year ago. Increased global demand from industrial distribution, growth in Asia and sales of new products contributed to the improvement.
Process Industries achieved first-quarter EBIT of $66.7 million, up from $24.1 million a year ago. The increase reflects higher volume as well as favorable pricing and mix.
Aerospace and Defense Segment Results
Aerospace and Defense had first-quarter sales of $79.1 million, down 14% from $92.1 million for the same period last year. The decline reflects reduced demand, principally in the segment's defense-related business.
The segment's EBIT was $2.2 million, compared with $11.9 million a year ago. The decline reflects lower sales volume and unfavorable manufacturing utilization.
Steel Segment Results
Sales for the Steel segment, including inter-segment sales, were $481.5 million in the first quarter, an increase of 78% from $270.3 million for the same period last year. Stronger demand, particularly in the oil and gas and industrial market sectors, and surcharges contributed to the improvement. Raw-material surcharges increased approximately $75 million from the first quarter last year.
First-quarter EBIT was $60 million, up from $19.9 million for the same period a year ago. EBIT performance benefited from stronger demand as well as mix, pricing and surcharges, partially offset by increased material costs.
Timken is increasing its 2011 full-year sales outlook to be up approximately 20 to 25% over 2010, driven primarily by stronger demand in the Steel, Process Industries and Mobile Industries segments. For its business segments, Timken expects:
- Mobile Industries segment sales to be up 10 to 15%, with increased overall demand in the off-highway, rail and heavy-truck sectors
- Process Industries segment sales to be up 20 to 25%, driven by increased demand from global industrial distribution, combined with sales of new products and continued growth in Asia
- Aerospace and Defense segment sales to be up 5 to 10%, reflecting improving demand in commercial aerospace and health and positioning control sectors, while the defense sector remains weak
- Steel segment sales to increase 35 to 40% from 2010, driven by improved demand across all market sectors, capacity increases and surcharges
The company is raising its 2011 full-year earnings estimate to a range of $3.80 to $4.10 per diluted share from its prior estimate of $3.30 to $3.60 per share. The increase reflects the company's strong first-quarter results and improved outlook for the balance of the year. The company expects cash from operating activities to be approximately $390 million, after $150 million of discretionary pension contributions made in the first quarter. Free cash flow is expected to be approximately $100 million after capital expenditures of around $220 million and dividends of approximately $70 million.