Blaming the faltering economy, Black & Decker Corp. said yesterday that its third-quarter profit fell by nearly half and that the fourth quarter will also likely be tough going.
The Towson-based power toolmaker was in line with analysts' expectations with a $46.4 million profit, or 57 cents a diluted share, for the three months that ended Sept. 30. That was down 46 percent from the $86.3 million - $1.03 a share - it made in last year's third quarter.
Sales were down 6 percent from $1.133 billion to $1.063 billion.
"During the third quarter we faced the effects of a slower-than-expected economy resulting in lower sales," Michael D. Mangan, senior vice president and chief financial officer, said in a conference call with analysts. "In addition, we continued to experience significant margin pressure principally from running our plants slower in order to manage inventory."
Gross margins declined about 3 percentage points in the third quarter. On the positive side, inventories were down $9 million - meaning that fewer products were sitting in Black & Decker warehouses waiting to be shipped.
"In light of the economic environment, I think the company is being fairly proactive with managing through the economic slowdown," said analyst Joseph Sroka of Merrill Lynch Global Securities.
The company said it has eliminated 4 percent of its work force since the beginning of the year - a total of about 800 jobs.
Sales in Black & Decker's Power Tools and Accessories segment were down 3 percent to $770 million, and profit declined 22 percent to $78.5 million. In North America, that segment saw stronger sales in its professional DeWalt line, but that was offset by lower revenue in its consumer product line.
The consumer product line was down because a major customer changed its shipping procedure, and its orders will be recorded in the fourth quarter instead of in the third quarter as it was in past years. Excluding that change, consumer power tools sales were flat.
The Hardware and Home Improvement segment had an 11 percent sales decline to $190.8 million, largely because of North America's economic slowdown. Profit fell 48 percent to $16 million.
Fastening and Assembly Systems saw its sales fall 1 percent to $121.5 million with a profit of $14.8 million, down 24 percent.
For the first nine months of the year, overall profit was down 47 percent to $121 million, and sales were down 5.6 percent to $3.3 billion.
"Looking ahead, we expect the world economies to remain weak, and it is the general consensus of economists that there will be negative U.S. growth in the fourth quarter," Chairman and Chief Executive Officer Nolan D. Archibald said in a statement.
"Based on this outlook, we expect fourth-quarter sales excluding foreign currency translation to be approximately flat [compared] to the fourth quarter of 2000, and diluted earnings per share to be in the 70-cent to 80-cent range."
Earnings in last year's fourth quarter were 64 cents a share.
Shares of Black & Decker were down 51 cents yesterday to close at $32.84 - a decline of 29 percent from their 52-week high of $46.37.