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Sauer-Danfoss Inc. reports third quarter 2008 results
- Record Quarter Earnings Increase 98% on Record Sales
- Turbulent Market Economies Drive Cautious Earnings Outlook
Sauer-Danfoss Inc. (NYSE: SHS) today announced its financial results for the third quarter ended September 30, 2008.
Net sales for the third quarter rose 8 percent to $490.2 million, compared with net sales of $451.8 million for the third quarter of 2007. Excluding the impact of currency translation rate changes and divestitures, sales in the third quarter grew 3 percent over the same quarter last year. The Company reported net income of $10.9 million, or $0.22 per share, for the third quarter, compared to net income of $5.5 million, or $0.11 per share for third quarter of 2007.
The Company's sales for the third quarter increased 13 percent in the Asia- Pacific region and 6 percent in the Americas while declining 2 percent in Europe, excluding the impact of currency and divestitures. Sales in the Propel segment increased 5 percent, sales in the Work Function segment increased 3 percent, while sales in the Controls segment declined 2 percent excluding currency and divestitures.
David Anderson, President and Chief Executive Officer, commented, "Notwithstanding the overall economic environment, we still achieved continuous growth in our third quarter. We posted record sales and doubled earnings for the quarter versus the prior year period. Asia-Pacific and the Americas' growth continued, but at a less robust rate while European sales for the quarter were slightly lower than last year's third quarter. Despite the current economic climate, we're realizing the positive effect of the initiatives we have taken over the past few years through improved operating margins."
Nine Months Review
Sauer-Danfoss had net sales of $1,719.1 million for the nine months ended September 30, 2008, an increase of 16 percent, compared to net sales of $1,478.4 million for the first nine months of 2007. Net sales for the first nine months of 2008, excluding currency translation rate changes and divestitures, rose 9 percent over the prior year period.
Net income for the first nine months of 2008 totaled $61.5 million, or $1.27 per share, compared to net income of $38.5 million, or $0.80 per share, for the same period last year. The Company had a one-time gain on the sale of real estate in the first nine months of 2008 of $1.4 million, or $0.02 per share, compared to restructuring costs for the first nine months of 2007 of $17.8 million, or $0.31 per share.
New Orders Decline
The Company received new orders of $397.9 million for the third quarter of 2008, a decrease of 18 percent from the end of third quarter 2007. Excluding currency translation rate changes, orders were down 22 percent.
Total backlog at September 30, 2008 was $929.5 million, a 23 percent increase from the same period last year. Excluding currency translation rate changes, backlog increased 20 percent.
Anderson added, "The increase in backlog, although still healthy, is down from the increase posted a quarter ago which is a reflection of a slowing demand in a number of our markets."
Continued Strong Cash Flow
Sauer-Danfoss' cash flow from operations for the first nine months of 2008 was $141.2 million, compared to $99.0 million for the first nine months of 2007. Capital expenditures were $129.5 million for the first nine months of 2008, compared to $83.0 million for the same period last year. These expenditures are in line with the Company's planned capacity increases for 2008. The Company's debt to total capital ratio, or leverage ratio, was 42 percent at September 30, 2008, compared to 43 percent at December 31, 2007.
Anderson stated, "As we continued to invest in expanding our capacity, we also continued to generate significant operational cash flow as reflected in the improvement in our leverage ratio. This additional capacity will support both current and future demand which we expect to be generated from our ability to continuously win new applications and provide more content on highly engineered vehicles which will come on line in the coming years."
Current Market/Economic Conditions
Anderson commented, "We obviously are watching the evolving events in the global credit markets and economies with concern. Our markets and customers are affected which will ultimately impact us as well. We suspect that the total backlog figures reported at the end of September are not yet fully reflecting this impact. Our management team has been taking steps to adjust our production plans to future demand, reducing our costs, and developing contingency plans."
Anderson continued, "Our plant and product line restructurings, along with better information from the business system implemented over the last few years, should serve us well as we move through these uncertain times."
Outlook More Cautious
"Based on the turbulence in the world economies and resulting slow down from our recent growth patterns combined with the impact on our product mix, we are taking a more cautious position regarding the outlook for the remainder of this year. We have adjusted the expectation for our full year performance by about 25 percent from our previous forecast, now expecting earnings to be in the range of $1.15 to $1.25 per share based on nominal annual sales growth of 8 to 9 percent. We still expect capital expenditures to be 7 to 8 percent of sales," concluded Anderson.
Members of Sauer-Danfoss' management team will host a Webcast on October 30 at 10 AM Eastern Time to discuss 2008 third quarter results. The call is open to all interested parties on listen-only mode via an audio webcast and can be accessed through the Investor Relations page of the Company's website at http://ir.sauer-danfoss.com. A replay of the call will be available at that site through November 13, 2008.
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