Steelcase 2Q Earnings Up

Grand Rapids, MI, September 21, 2007-- Steelcase reported higher fiscal second-quarter earnings on Thursday, but its shares fell along with its peers' on worries about the industry outlook.

Steelcase said second-quarter earnings rose 42% to $37.7 million, or $.26 per share, from $26.6 million, or $.18 per share, on double-digit sales gains internationally, cost cuts and more efficient manufacturing methods.

Analysts, on average, had expected a profit of 23% per share.

The surprisingly strong earnings lifted shares in early trade but the stock fell after investors began to wonder about the role restructuring credits of $1 million and foreign exchange possibly played in boosting the results, Morningstar analyst John Gabriel said.

"There is some skepticism regarding the cleanliness of the numbers," Gabriel said. "How strong is international really? Are things fundamentally really doing well, or did they get a lift from the weakening dollar?"

Sales rose 5% to $825 million, ahead of estimates of $793 million. Steelcase's international segment led with an 19% revenue increase. That segment reported an operating profit versus a loss a year ago.

Steelcase's shares were also affected by worries, first voiced by rival Herman Miller Inc (MLHR.O: Quote, Profile, Research) when it reported first-quarter results on Wednesday, that the North American office furniture market might be softening as businesses tighten spending in response to broader economic turmoil, Gabriel said.

Steelcase said it has not seen any significant change in customers' buying plans as it monitored recent uncertainty in credit markets, and it sounded an optimistic note during its conference call.

"The fundamentals that drive our business toward better performance are still there," Steelcase CEO James Hackett said.