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Emerson Electric Co EMR
Q1 2012 Earnings Call Transcript

Transcript Call Date 02/07/2012

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Emerson's Investor Conference Call. During today's presentation, by Emerson management all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This conference is being recorded today, Tuesday, February 7, 2012.

Emerson's commentary and responses to your questions may contain forward-looking statements, including the Company's outlook for the remainder of the year. Information on factors that could cause actual results to vary materially from those discussed today is available at Emerson's most recent Annual Report on the Form 10-K as filed with the SEC.

I would now like to turn the conference over to our host Patrick Fitzgerald, Director of Investor Relations at Emerson. Please go ahead.

Patrick Fitzgerald - Director, IR: Thank you, Luke. I am joined today by David Farr, Chairman and Chief Executive Officer of Emerson; and Frank Dellaquila, Senior Vice President and Chief Financial Officer.

Today's call will summarize Emerson's first quarter 2012 results. A conference call slide presentation will accompany my comments and is available in the Investor Relations section of Emerson's website at emerson.com. A replay of this conference call will be available on the website after the call for the next three months.

I will start with the highlights of the quarter as shown on Page 2 of the conference call presentation.

Fourth quarter sales were down 4% to $5.3 billion, caused by several near-term challenges. A supply chain disruption caused by the Thailand flooding impacted results by approximately $300 million. U.S. telecommunications carriers deferred investments, awaiting the outcome of potential industry consolidation. HVAC OEMs in the U.S. and China pushed inventories very low on economic uncertainty, and there was broad European economic weakness.

Operating profit margin declined 220 basis points from the prior quarter to 13.2%, which was primarily driven by volume deleverage. Earnings per share of $0.50 was down 21% from the prior year quarter. Operating cash flow increased 4% versus the prior year quarter to $334 million. Our balance sheet strength continues to enable us to invest in growth opportunities. Despite the pressure on Q1 from numerous near-term headwinds, our outlook for 2012 remained favorable.

Next slide, the P&L summary. Net underlying sales were down 4%, with negligible impact from currency, acquisitions, and divestitures. Operating profit declined 18%, as the magnitude of sales decline and resulting unfavorable mix drove substantial volume deleverage. Net earnings were down 23%. We repurchased 4.8 million shares for $226 million and EPS declined 1% in the quarter.

Next slide, underlying sales by geography; gross performance was affected by the previously mentioned challenges, underlying sales in U.S. decreased 4%. Europe was flat. Asia was down 8%, with China down 13%. Latin America increased 3%. Canada increased 6% and the Middle East and Africa was down 4%, resulting in underlying and net sales down 4%.

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