ArvinMeritor Inc. (ARM) reported Tuesday that it swung to a
fiscal third-quarter loss amid weak auto-production volume, but
core results beat expectations, helped by cost cuts.
For the fiscal fourth quarter, the auto-parts supplier expects a
wider loss per share than in the third quarter, before items, on
"slightly lower" revenue, citing seasonal patterns.
The company also reached an agreement to sell its wheels
business for $180 million to Brazilian producer Iochpe-Maxion. The
deal is expected to close by Sept. 23.
Chairman and Chief Executive Charles McClure said market
conditions will "remain tough" through our fourth fiscal quarter,
but ArvinMeritor is "taking appropriate actions" to offset the
challenges to remain in compliance with its year-end credit line
financial covenant. The company said the North American and
European markets remain depressed, while South America and Asia
Pacific continue to show signs of improvement.
The results could be seen as further evidence that the company's
efforts to cut costs, streamline operations and manage working
capital are gaining traction. Weak demand has led to industrywide
cuts in production, jobs and dividends. In May, ArvinMeritor
credited some 3,000 job cuts since October for its projected annual
savings of $430 million. Streamlining moves also have included
announcing in June that it would sell its stakes in two joint
ventures in its light-vehicle chassis business.
For the quarter ended June 30, the maker of integrated systems,
modules and components serving commercial truck and light vehicles
makers swung to a loss of $162 million, or $2.23 a share, from a
year-earlier profit of $44 million, or 60 cents a share. Excluding
restructuring charges and tax-related charges, the company would
have recorded a 39-cent per share loss from continuing operations,
compared with prior year earnings of 66 cents per share.
Analysts polled by Thomson Reuters most recently put the
projected loss, excluding items, at 31 cents a share.
Sales plunged 47% to $993 million, reflecting significantly
lower production volume in most global original-equipment markets.
The drop was 42%, excluding foreign-exchange impacts. The revenue
figure was well below ArvinMeritor's forecast for "about flat"
revenue. Analysts were expecting $1.21 billion.
Gross margin fell to 7.8% from 9.6%.
Sales at its commercial-vehicle systems business - its largest
by far - plunged by half to $683 million as profit in the unit
dived 70%. The company said the margin decline was about 30% - an
achievement considering its big sales drop, it said, crediting
operational improvements, restructuring efforts and
cost-cutting.
-By Mike Barris, Dow Jones Newswires; 212-416-2330;
mike.barris@dowjones.com