Sauer-Danfoss Inc. has announced its financial results for the second quarter ended June 30, 2012.
Second Quarter Review
Net sales for the quarter declined 8% to $518.8 million, compared to net sales of $563.3 million for the second quarter of 2011. Excluding the impact of changes in currency translation rates, sales in the second quarter declined 3% over the same quarter last year. Sales for the second quarter increased 12% in the Americas, but declined 10% in Europe and 26% in the Asia-Pacific region, excluding the impact of changes in currency translation rates. Sales increased 2% in the Controls segment and 2% in the Stand-Alone Businesses segment, but declined 14% in the Work Function segment and 4% in the Propel segment, excluding the impact of changes in currency translation rates.
The company reported net income of $56.4 million, or $1.16 per share, for the second quarter of 2012, compared to net income of $74.9 million, or $1.54 per share, for the second quarter of 2011. Second quarter 2011 results were favorably impacted by $6.2 million, or $0.13 per share, related to the reversal of deferred tax asset valuation allowances.
Sven Ruder, President and Chief Executive Officer, comments, "Our second quarter results reflect the slowing global market for our products. Our sales in the Americas continue to show growth, but at lower rates than last quarter. Sales in Europe are now down compared to a year ago. The large drop in our Asia-Pacific sales is comparable to the decline reported last quarter and continues to be amplified by the comparison with very strong sales of a year ago in China before the markets slowed swiftly in the second half of last year. In light of the drop in sales, I am pleased with our operating performance. We were able to hold our gross margins level with last year which has kept our operating margins high. This is a credit to our employees throughout our organization who have responded quickly to trim costs as sales have tapered off. We continue with our investments in Asia-Pacific to meet the future market opportunities in this region, even if business is slow right now."
Orders and Backlog Essentially Level
The company received new orders of $494.3 million for the second quarter of 2012, a 2% increase compared to second quarter 2011 new orders of $485.6 million. Excluding the impact of changes in currency translation rates, new orders increased 7%.
Total backlog at June 30, 2012, was $887.2 million, a 1% decline compared to the same period last year of $895.1 million. Excluding the impact of changes in currency translation rates, backlog increased 4%.
Six Month Review
The company reported net sales for the six months ended June 30, 2012, of $1,092.8 million, compared to net sales of $1,128.1 million for the first six months of 2011. Net sales for the first six months of 2012 were level compared to the prior year period, excluding the impact of currency translation rate changes.
Net income for the first six months of 2012 was $121.2 million, or $2.50 per share, compared to net income of $145.4 million, or $3.00 per share, for the same period last year. 2011 results were favorably impacted by $11.1 million, or $0.23 per share, relating to the reversal of deferred tax asset valuation allowances.
Strong Cash Flow
Cash flow from operations for the first six months of 2012 was $166.9 million, compared to $169.2 million for 2011. Capital expenditures for the first six months of 2012 were $12.7 million compared to $14.1 million for the same period last year.
"We generated $141 million of free cash flow for the first six months, comparable to the strong cash flow of last year. We continue to focus on cash flow through our management of working capital and controlling capital expenditures," states Ruder.
Outlook Lowered for 2012
Ruder concludes, "With our markets in decline in both Europe and Asia-Pacific and growth slowing in the Americas, our outlook for the full year is lower than what we expected a quarter ago. In addition, the weakening of the euro is also impacting reported sales. The impact is approximately four percentage points of the forecasted decline in sales. We are working hard at holding our contribution margins as sales decline. We are also cutting our fixed costs where prudent, but continue to invest in China and in new product development."
The outlook for 2012 has been revised downward as follows:
- Annual sales decline of 5 to 10% from 2011 levels (previously growth of 0 to 10%)
- Expected earnings in the range of $3.50 to $4.25 per share (previously $4.00 to $5.00 per share)
- Capital expenditures of approximately $60.0 to $70.0 million (previously $70.0 to $80.0 million)