Morris-Township, NJ, July 17--Honeywell International on Thursday reported a 30 percent drop in second-quarter profit as its commercial aerospace business continued to slump and pension, administrative and product development costs all rose.
Honeywell also said it reduced its global workforce during the quarter from 109,000 to 108,000. The 1,000-job net reduction resulted from 1,600 job cuts--part of 5,000 announced late last year--offset by about 600 staff additions from new hires and acquisitions of new businesses.
The company posted net income of $319 million, or 37 cents per share, matching the consensus forecast of analysts surveyed by Thomson First Call. A year earlier, net income was $459 million, or 56 cents per share.
Revenues were up 2 percent, to $5.75 billion from $5.65 billion in the April-June quarter of 2002. However, Dave Anderson, who took over as chief financial officer last month, said favorable currency exchange rates had boosted revenues 4 percent.
"The results for the second quarter represent solid performance for Honeywell with good revenues, earnings and cash flow in a difficult economic environment," said Dave Cote, chairman and chief executive officer.
Free cash flow totaled $382 million, and one of Honeywell's smaller business segments, transportation systems, increased its operating profit 8 percent to $112 million. Honeywell's second-biggest business, building automation and control systems, saw revenues grow 4.5 percent, to $1.84 billion.
But segment profit for its crucial aerospace business, which makes aircraft electronics, braking systems and other products, plunged 38 percent to $224 million. Cote said that was mainly because reduced commercial air traffic during the quarter, chiefly related to the SARS epidemic, hurt sales of replacement aircraft parts, which have a higher profit margin than new equipment. The segment's revenues dipped 2 percent to $2.2 billion.
Cote noted the aerospace business won $1.3 billion in new contracts at the Paris Air Show last month, and got a large order from US Airways for integrated cockpits.
"We're still predicting that second half of this year (the aerospace business) will be down from last year, although up from the first half of this year," he said, because air travel normally increases during the summer vacation and fall holiday periods.
Cote noted the company continues to restructure its specialty materials division, divesting noncore businesses and replacing them with core ones. During the quarter, Honeywell brought a South Korean company's nylon films manufacturing plant and sold its engineering plastics business to BASF in exchange for the chemical maker's nylon fiber business and $90 million.
Anderson predicted full-year earnings per share of $1.58, a penny more than analysts are forecasting. The company did not forecast 2004 earnings, but said pension expenses will equal 25 cents to 30 cents per share next year, down from the 36 cents anticipated for this year.
For the first six months of the year, net income was down 31 percent, to $573 million, or 69 cents per share, from $835 million, or $1.02 per share, in the year-ago period. Revenues for the six months were up 3 percent, to $11.15 billion from $10.85 billion in the first half of 2002.
