Sauer-Danfoss Inc.
Sauer-Danfoss Inc.:SAUER-DANFOSS INC. REPORTS THIRD QUARTER 2005 RESULTS
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The issuer is solely responsible for the content of this announcement.
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SAUER-DANFOSS INC. REPORTS THIRD QUARTER 2005 RESULTS
– Company Reports Higher Sales and Strong Cash Flow
– Earnings Reflect Business System Implementation Costs, Weak Turf Care Market
and Capacity Constraints
– Order Situation continues positive
Chicago/Neumünster, November 2, 2005 – In the third quarter 2005 Sauer-Danfoss
Inc., listed on the NYSE and Frankfurt’s prime standard (NYSE: SHS; FSE:
SAR), generated net sales of $342.0 million, compared to $324.7 million in the
third quarter of 2004. Excluding the impact of currency translation rate
changes, sales increased by 5 percent. The specialist for mobile hydraulic and
electronic systems and components reported a net income of $4.3 million for
the third quarter 2005, or $0.09 per share, compared to the third quarter 2004
net income of $7.7 million, or $0.16 per share. Third quarter 2005 earnings
were impacted by expenses related to the continued implementation of a common
company-wide business system of $4.7 million, or $0.06 per share. Third
quarter 2004 results were impacted by restructuring costs, which amounted to
$2.1 million, or $0.03 per share.
David Anderson, President and Chief Executive Officer, stated, “While we
continue to report record sales, our sales growth rate in a couple of key
segments, specifically in the Americas, has slowed considerably. This is most
notable in the agricultural and weather-sensitive turf care markets, which
together were down over 20 percent, offset by strong increases in the
construction, road building and material handling markets. At the same time,
our sales in Asia Pacific are up 20 percent compared to last year due to
further improvement in the Japanese export market.” By operating segment, on a
comparable basis, Propel, Controls and Work Function sales all increased, by
8 percent, 4 percent and 3 percent, respectively
Anderson stated, “We are not satisfied with our third quarter earnings. The
first area is related to the expenses incurred in the process of implementing
a common companywide business system. Overall the project is being executed
extremely well; ahead of schedule and only slightly over budget. We continue
to fund this project more aggressively than originally planned with outside
consulting assistance as well as through the significant redeployment of
internal resources.” Furthermore Sauer-Danfoss is still being negatively
impacted by higher than normal operational costs associated with specific
products manufactured in Euro-based countries that are in heavy and rapidly
increasing demand in the U.S. Considerable progress has been made in
establishing additional capacity in the U.S. to reduce what have been
significant cost penalties and productivity inefficiencies resulting from
expedited manufacturing schedules and premium freight methods. Finally, a
shift in market mix driven by the weakening of the turf care and agricultural
markets in the Americas has also had a negative impact on earnings.
Orders received for the third quarter 2005 were $364.3 million, up 13 percent
from the same period last year, with little impact from currency translation
rate changes. Total backlog at the end of the third quarter 2005 was $515.6
million, up 24 percent from the third quarter of 2004.
NINE MONTH REVIEW
Net sales for the nine months ended September 30, 2005, were $1,202.7 million,
an increase of 13 percent over sales of $1,064.9 million for the first nine
months of 2004. On a comparable basis, excluding the impact of currency
fluctuations, net sales were up 11 percent over last year. Net income for the
first nine months of 2005 was $34.7 million, or $0.73 per share, compared to
net income for the same period last year of $40.4 million, or $0.85 per share.
2005 results were impacted by $14.3 million, or $0.19 per share, of costs
relating to the implementation of our companywide business system, compared to
$1.9 million or $0.02 per share for 2004.
Cash flow from operations for the first nine months of 2005 was $102.2
million, compared with last year’s record level of $115.3 million. Capital
expenditures for the nine-month period were $61.0 million. Capital
expenditures were $46.9 million for the comparable period in 2004. At the end
of the third quarter the Company’s debt to total capital ratio, or leverage
ratio, was at 39 percent. “Cash flow from operations continues to be strong
for the quarter, generating over $30.0 million,” stated David Anderson. “This
strong cash flow has allowed us to fund needed investments in increased
production capacity and our common business system project, and higher
dividend levels, while still reducing our debt.”
For the fourth quarter Sauer-Danfoss expects expenses for targeted
restructuring activities in Europe to impact results by approximately $0.05
cents per share and delays in working through the phase out of its legacy
products will keep the company from realizing the resulting benefits in the
fourth quarter. In total, with all these factors considered, Sauer-Danfoss is
revising its outlook for full year 2005 earnings to be in the range of $0.60
to $0.70 cents per share.
Anderson continued, “There are a couple of important near-term capacity and
production location issues that we are addressing which offer opportunities to
reduce costs and improve our overall operational efficiencies. We have also
announced a global price increase effective January 1, 2006, which
differentiates by geographic region, market segment, and product and will roll
previous surcharges into our base pricing.”
All statements regarding future performance, growth, sales and earnings
projections, conditions or developments are forward-looking statements. These
statements are based on current financial and economic conditions and rely
heavily on the Company’s interpretations of what it considers key economic
assumptions.
A conference call on the results for the third quarter 2005 will be held in
English on November 2, 2005 at 4:00 PM Frankfurt time. Please find further
information on the quarterly results at http://www.sauer-danfoss-ir.com.
Further Information: Sauer-Danfoss Inc. – Investor Relations
John N. Langrick, Director of Finance Europe, Sauer-Danfoss Inc., Tel.: +49
4321-871-190, Fax: +49 4321-871-121, Krokamp 35, D-24539 Neumünster,
jlangrick@sauer-danfoss.com
Christof Kaplanek, Public Relations, HOSCHKE & CONSORTEN, Tel.: +49 40-369050-
38, Fax: +49 40-369050-10, Deichstr. 29, D-20459 Hamburg,
c.kaplanek@hoschke.de
End of announcement (c)DGAP 02.11.2005
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WKN: 880208; ISIN: US8041371076; Index:
Listed: Amtlicher Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin-
Bremen, München und Stuttgart
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