Ingersoll-Rand P.L.C.’s year-on-year revenues decreased by 19 percent in the third quarter, including a negative currency impact of 2 percent, due to sluggish demand from its major end markets in crisis-hit United States and Europe.
Revenues declined from $4.313 billion in the third quarter of 2008 to $3.482 billion in the same quarter this year.
In particular, revenues from the United States slid by 15 percent while revenues from international operations went down by 26 percent, with the sharpest year-on-year decline recorded in Europe.
"It appears that we are bouncing along the bottom in most of our businesses," remarked Herbert L. Henkel, Ingersoll-Rand chairman and chief executive.
Net earnings in the third quarter of 2009 came in at $216.6 million compared from $227.6 million in the same period last year, translating to a decline of earnings per share from 70 cents to 65 cents.
Third-quarter net income included $224.9 million from continuing operations and $8.3 million of after-tax costs from discontinued operations.
Operating income also decreased year-on-year from $347.4 million to $318.3 million. Interest expense also went down from $83.7 million to $76.5 million due to lower debt balances.
New York Stock Exchange-traded Ingersoll-Rand attributed lower operating profits and margins to substantial declines in volume, unfavorable product mix and negative currency impact. It added that volume decline was only partially offset by expense reductions, productivity actions and lower commodity costs.
Productivity savings
Nevertheless, Ingersoll-Rand said it is on track to achieve $670 million in productivity savings for the full year, exceeding a $650 million target, on the back of a 5.2 percent increase gross productivity in the third quarter.
Controlled spending and working capital reductions also contributed to cash generation which enabled the company to “significantly accelerate our debt reduction compared with our 2009 target” said Mr. Henkel.
Total debt at the end of the third quarter was approximately $4.1 billion. Year-to-date, the company has generated available cash flow of approximately $1.2 billion and reduced total financing by $850 million.
Ingersoll-Rand projects fourth quarter revenues at $3.2 billion to $3.4 billion as the developed markets continue to contract. Full year revenues are expected to fall in the range of $13.1 billion to $13.3 billion, marking about a 19 percent decline from 2008.
The global diversified industrial company pointed to some encouraging signs that can help it bounce back. “We do see some tentative positive signs in residential security and H.V.A.C. [heating, ventilating and air-conditioning], North American refrigerated trailers and across several of our businesses in China,” said Mr. Henkel.
However, he said non-residential construction in the United States and European industrial and construction markets will continue to be tough.
Mr. Henkel said that though global recovery remains cloudy, internal cost reduction and productivity improvement can still help the company grow earnings in 2010. He added that productivity is planned to exceed cost inflation by one to two percentage points while earnings per share is expected to fall in the range of $2 to $2.40.
Ingersoll-Rand’s business is mainly in four segments: air conditioning systems and services; climate control technologies; industrial technologies; and security technologies.
Ingersoll-Rand's revenues reel due to crisis-hit markets
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