Donaldson Company Inc. announced its financial results for its fiscal 2014 third quarter ended April 30, 2014.
Donaldson Company Inc. announced its financial results for its fiscal 2014 third quarter ended April 30, 2014. Net sales increased 1 percent from the third quarter of 2013, to $624 million. Operating income declined 6 percent, from $99 million in third-quarter 2013 to $93 million in 2014. Net earnings declined 4 percent from $70 million in 2013 to $67 million in 2014.
"We are proud of our execution during the quarter while we remain aggressively focused on additional growth opportunities," said Bill Cook, Donaldson's CEO. "Our end market conditions remain mixed as demand for our replacement filters continues to improve in both our Engine and Industrial segments, while conditions for new first-fit systems in our OEM markets are recovering slower than we had anticipated.”
According to Cook, the company’s Engine Products sales increased 5 percent in local currency from 2013, driven by increases in Engine Aftermarket and On-Road sales of 11 percent and 13 percent, respectively. Industrial Products' sales decreased 7 percent in local currency as a result of a 40 percent decline in Gas Turbine shipments from third-quarter 2013.
Partially offsetting the Gas Turbine sales decrease were Industrial Filtration Solutions and Special Applications businesses, which grew 8 percent and 4 percent, respectively. Internationally, excluding Gas Turbine sales, local currency sales were strong with Europe up 7 percent, Asia Pacific up 10 percent and Latin America up 23 percent, Cook said.
"As we begin our fourth quarter, we have narrowed our guidance ranges. We reduced our Industrial Products' sales outlook due to a couple of factors. First, the continued geopolitical uncertainty continues to negatively impact the recovery for general industrial capital investment and, as a result, the demand for our new Industrial Filtration Solutions systems,” Cook said. “Second, several of our large gas turbine projects that were scheduled for shipment in our fourth quarter have been rescheduled by our customers to be delivered in our FY15.”
Operating expenses for the quarter were $130.7 million, up 6.4 percent from 2013. As a percent of sales, operating expenses were 20.9 percent compared to last year's 19.8 percent. Operating expenses year-to-date were $382.9 million, or 21.2 percent of sales, compared to $375.5 million, or 20.8 percent of sales in 2013.
Company sales are projected to be between $2.44 and $2.48 billion, or a slight increase over the prior year including the negative impact of foreign currency exchange rates. Cash generated by operating activities is projected to be between $310 and $330 million. Capital spending is estimated to be approximately $90 million.
The company now forecasts its FY14 Engine Products sales to increase 3 to 7 percent, including the negative impact of foreign currency. On-road OEM customers are planning to build more heavy- and medium-duty trucks in 2014. Demand from off-road OEM customers is anticipated to continue to be mixed: build rates of construction equipment are expected to improve in North America and Europe but remain soft in Asia, build rates of agriculture equipment are forecasted to decrease, and the build rates of mining equipment are expected to remain weak.
The company anticipates continued growth for its Engine Aftermarket business. Utilization rates for off-road equipment and on-road heavy truck fleets are expected to continue improving. Donaldson expects to benefit from its continued expansion into emerging economies, the increasing number of first-fit systems installed in the field with its proprietary filters, and through continued expansion of its product portfolio.
Donaldson now forecasts Industrial Products sales to decrease 4 to 7 percent, including the negative impact of foreign currency. Industrial Filtration Solutions' sales are projected to increase 2 to 5 percent. Replacement filter sales are expected to remain at record levels due to improving general manufacturing conditions, while new filtration system sales will remain flat in the near-term due to continuing low levels of new equipment investment by manufacturers.
Donaldson anticipates Gas Turbine sales to decrease 29 to 32 percent from our record sales last year due to the current slowdown in large turbine power generation projects. Special Applications sales are forecast to increase 2 to 5 percent due to improved market demand for semiconductor and venting products.