Black & Decker net falls on housing woes Black & Decker profit falls 18%

Profit down 18%

sales slip 3% as economy continues to pinch building industry

July 26, 2008|By Lorraine Mirabella | Lorraine Mirabella,Sun reporter

Towson-based Black & Decker Corp. said yesterday that net earnings fell 18 percent in the second quarter as a sharp downturn in home construction and remodeling continued to hurt sales.

The maker of power tools and hardware products reported net earnings of $96.7 million, or $1.58 per diluted share, compared with earnings of $118 million, or $1.75 per share, for the second quarter of 2007.

Second-quarter sales fell 3 percent to $1.6 billion, the company said. The decrease included a positive 5 percent impact from foreign currency translation.

"The U.S. market remains weak for housing-related products and has deteriorated in the automotive and consumers sectors," said Michael D. Mangan, chief financial officer, yesterday during a conference call with analysts. "Conditions in some European markets also weakened this quarter."

But the company said its performance met expectations, despite the weak economy and rising commodity costs. Net earnings beat Wall Street analysts estimates of $1.42 per share.

"Two years into a severe downturn, Black & Decker still delivers solid profitability, generates outstanding cash flow and maintains a strong balance sheet," Nolan D. Archibald, chairman and chief executive officer, said in a news release.

Sales in the manufacturer's power tools and accessories division were down 10 percent, with industrial products down by double digits and consumer products sales decreasing more than 25 percent, Black & Decker said. In one bright spot, Latin American sales grew more than 20 percent.

Sales in the hardware and home improvement segment fell 5 percent, the company said.

Mangan said during the conference call that new product launches remain on track for the third quarter, including a new line of lithium ion drill by Porter Cable and Dewalt heavy duty work lights.

Responding to one analyst's question about whether the company planned any major restructuring in response to decreased sales, Mangan said B&D had consolidated some operations late last year, closed two plants in the first quarter and reduced the work force by 10 percent since the beginning of the year.

"As we look forward, we will continue to take actions as appropriate given the selling environment," he said. "We have taken significant actions and will take actions as necessary but we don't have one big restructuring plan."

In response to another question about the company's cost cutting, Mangan said the company was exploring locations such as India and Vietnam for manufacturing but had no current plans to shift from its three key areas of China, Mexico and the Czech Republic.

"Do not expect wholesale change in our manufacturing footprint," Mangan said. "China is the most cost-effective place to manufacture power tools."

The company narrowed its forecast yesterday for full year diluted earnings to a range of $5.25 to $5.45 per share from a previous guidance of $5.25 to $5.65.

Shares of Black & Decker fell 4.7 percent yesterday, closing at $56.93 per share.

lorraine.mirabella@baltsun.com

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