graham warwick / washington Dc
But the high cost of its failed merger with GE is partly responsible for plunging profits
Honeywell's second-quarter net income plunged 92% to $50 million after the company incurred charges of $651 million, including costs related to its failed merger with General Electric. Revenues for the quarter slid almost 4% to $6.07 billion and operating margins fell to 12.1%, from 15.4% a year ago.
"Honeywell had a challenging second quarter," says new chairman and chief executive Larry Bossidy, who returned to the helm after the European Commission blocked the merger with GE. He blames the profits slump on "a softening economy, pronounced weakness in some business segments, cost inefficiencies and continued high raw material costs". Performance materials were particularly badly hit.
Aerospace fared better than other business segments, with revenues up 5% to $2.53 billion on higher original equipment and aftermarket sales of commercial avionics "and double-digit growth in air transport and regional original equipment", says Honeywell. Operating margins were lower, but nowhere on the same scale as other parts of the business.
Before charges, Honeywell's net income for the second quarter was $450 million, compared with $617 million a year ago. The charges of $651 million includes $42 million in merger-related expenses, plus $123 million in repositioning charges, $140 million in contract losses, $167 million in asset impairments and $162 million to cover legal and environmental claims.
GE, meanwhile, reported its highest-ever quarterly profit, with earnings up 15% to almost $3.9 billion on revenues down 3% to $32 billion. Operating margin was up slightly to a record 20.6%. GE Aircraft Engines saw its quarterly profit rise 10% to $667 million on sales up 11% to $3.05 billion.
United Technologies reported higher second-quarter revenues and earnings, with operating profit at Pratt & Whitney up 24% to $353 million on sales up 9% to $1.96 billion because of cost reductions and higher revenue at Pratt & Whitney Canada. Growth at Hamilton Sundstrand and increased shipments at Sikorsky boosted operating profit at UTC's Flight Systems segment by 28% to $179 million on sales up 11% to $1.34 billion.
A strong performance by its dominant Aerospace segment, which increased its revenues by 18.5% boosted Goodrich's results. Aerospace revenues increased 18.5% to $1.1 billion and operating profit by 19.2% to $169 million, lifting the company's net income slightly to $83.3 million on sales up 14% to $1.24 billion.
Source: Flight International
