Black & Decker's profits surge 30% Sales strong in North America

July 18, 1996|By Sean Somerville | Sean Somerville,SUN STAFF

Black & Decker Corp.'s second-quarter earnings climbed by more than 30 percent as strong North American sales outweighed sluggish sales in Europe, the company said yesterday.

The Towson-based maker of power tools, outdoor products and accessories reported net earnings of $45.3 million for the quarter ending June 30, up from $34.8 million reported for the corresponding period last year. The earnings amounted to 47 cents a share, up 27 percent from 37 cents a share in the 1995 period. Sales for the quarter increased by 6 percent to $1.2 billion.

Earnings were slightly higher than analysts' estimates, which averaged 45 cents a share. Black & Decker's stock jumped $4.75 to $39.25 yesterday.

"The numbers this morning made many industry observers sit up and take notice," said David Leibowitz, an analyst who follows the company for New York-based Burnham Securities.

Nolan D. Archibald, Black & Decker's chairman and chief executive officer, said North American sales of consumer power tools and electric lawn and garden tools increased "by double-digit rates."

He singled out as strong performers the DeWalt professional line of cordless 18-volt tools and VersaPak interchangeable battery products. He also said new construction in the western United States boosted sales of Kwikset locks and Price Pfister plumbing products. "Sales growth, which was solid in the first quarter, accelerated in the second quarter," he said in a statement. "Our domestic consumer and global commercial and industrial businesses reported particularly good results."

Despite the company's poor performance in Europe, Archibald said, several factors will boost earnings there during the rest of the year. He said Black & Decker has started generating savings from a restructuring plan announced last April that is intended to cut the company's global work force by 1,100, or 4 percent, with almost all of the cuts coming in Europe.

Company officials would not disclose details of the job cuts yesterday. Barbara Lucas, a company spokeswoman, said the restructuring would likely save the company about $10 million in 1996. The company will reap most of the savings, about $40 million annually, in later years. "The restructuring is proceeding," she said. "We don't get the annualized benefits until it's all done."

Archibald also said the company's introduction of DeWalt and VersaPak in Europe has generated a "positive" response.

"The quarter is a little better than we expected," said Susan Gallagher, an analyst with NatWest Securities Corp. "The company saw strengths domestically as a result of new products. Europe continues to be a problem because of the external economic environment. But Black & Decker is taking internal actions. We should see improvement in the second half."

Net earnings for the first half of the year were up about 38 percent to $83.3 million. On a per-share basis, half-year earnings were up 34 percent to 86 cents. Analysts are forecasting annual earnings of between $2.25 and $2.60 a share.

Despite the strength of the dollar and weaknesses in Europe, "products are still moving across the counter," said Leibowitz, the Burnham Securities analyst. "It is a good statement, given that we're going into the national hardware trade show in Chicago."

Michael L. Mead, an analyst with Legg Mason Wood Walker, said Germany is Black & Decker's only weak market. "They have reduced costs there and that will have a positive impact," he said.

In his statement, Archibald said new products and lower costs helped the company overcome pressure on margins from "competitive pricing" and efforts to reduce inventory that included a slowdown in manufacturing. Operating income for the quarter increased by 11 percent.

The company increased its half-year cash flow by $100 million over the first six months of 1995.

Gallagher of NatWest Securities also said Black & Decker had decreased its once-paralyzing debt to 57.2 percent of capital, from 66.2 percent in the same quarter last year.

Pub Date: 7/18/96

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