Rockwell Automation 1Q Net Down 24%, Cuts View For Year

   DOW JONES NEWSWIRES 
 

Rockwell Automation Inc. (ROK) posted a 24% decline in fiscal first-quarter net income as margins and sales dropped amid the stronger dollar.

The maker of industrial-automation products also slash its outlook for the year. It now expects earnings of $1.55 to $2.25 a share and revenue falling 12% to 17%, excluding currency fluctuations. The company in November projected earnings of $3.10 to $3.60 and total revenue down as much as 5%.

Rockwell, like other industrial manufacturers, is feeling the impact of sharp declines in market demand as customers cut spending amid the recession. The company is shrinking as demand slows and in October said it would cut 3% of its work force to save $75 million this year and about $85 million in fiscal 2010.

Despite strong cash flow, a revolving credit line is due to expire in October and could pose difficulties if credit markets remain constrained. Moody's Investors Service placed a negative outlook on its credit rating in mid-December, noting that economic prospects have dimmed in its market globally, posing challenges for the company this year.

Chairman and Chief Executive Keith D. Nosbusch said Monday that after a "very solid" October, Rockwell experienced "a severe decline in customer demand during the second half of the quarter." As a result, he said, the company's first-quarter performance was below its expectations.

The maker of motor starters, timers and drives posted net income for the quarter ended Dec. 31 of $118.4 million, or 83 cents a share, down from $156.6 million, or $1.04 a share, a year earlier. Earnings from continuing operations fell to 81 cents a share from $1.04.

Revenue fell 11% to $1.19 billion, with the stronger dollar accounting for 6 percentage points of the decrease. Rockwell gets about half of its sales from the U.S.

Analysts polled by Thomson Reuters were looking for earnings of 84 cents a share on revenue of $1.26 billion.

Gross margin fell to 39.6% from 43.2% amid the stronger dollar and sales decline.

The earnings and sales declines at its two biggest businesses - Control Products & Solutions and Architecture & Software - were similar.

Rockwell's rival, Swiss engineering company ABB Ltd. (ABB), is facing some of the same problems. Its orders also fell late last year, and it responded by reducing expectations for the year and cutting costs.

Rockwell shares closed Friday at $26.04 and there was no pre-market trading. The stock has lost nearly half its value the past six months.

-By Mike Barris, Dow Jones Newswires; 201-938-5658; [e-mail]

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