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Donaldson Co Inc, USA
COMPANY WATCH
ESCO Technologies Inc, USA
Donaldson Co Inc, USA Key Figures (US$ million) Third quarter ended 30.4 2016
2015
Net Sales
571.3
575.6
Cost of Sales
374.7
381.5
Gross Margin
196.6
194.1
Operating Expenses
121.7
127.0
Operating Income
74.9
67.1
Earnings before Income Taxes
72.1
67.8
Net Earnings
54.8
47.8
Key Figures (US$ million) Second quarter ended 31.3 2016
2015
138.9
128.9
Net Sales Of Which: Filtration
49.0
48.8
Cost of Sales
88.1
81.1
Selling, General and Admin Expenses
32.5
32.9
Earnings before Income Taxes Of Which: Filtration
13.6
12.8
9.1
11.0
8.6
7.6
Net Earnings Nine months ended 30.4 2016
2015
1626.5
1760.6
Net Sales Cost of Sales
1081.0
1154.3
Gross Margin
545.5
606.3
Operating Expenses
361.4
396.4
Operating Income
184.1
209.9
Earnings before Income Taxes
174.9
210.5
Net Earnings
131.3
151.7
Six months ended 31.3 2016
2015
Net Sales Of Which: Filtration
271.8
249.5
91.4
89.7
Cost of Sales
168.2
152.8
Selling, General and Admin Expenses
65.8
66.4
Earnings before Income Taxes Of Which: Filtration
26.6
26.4
17.3
18.3
Net Earnings
17.4
17.6
COMMENT COMMENT Donaldson Co Inc has posted net sales of US$571.3 million for its third quarter of fiscal 2016, a decrease of 0.7% on the year earlier. Excluding the negative impact from currency translation, revenues increased 0.2% on the 2015 equivalent. Sales in the Engine Products segment fell 2.9% (2.1% at constant currencies) on the year earlier to US$357.3 million. The bright spot for the division was its aftermarket sales, which were up 4.5% on twelve months earlier. In contrast both off-road and on-road revenues were down significantly, falling 19.6% and 19.0% respectively, while aerospace & defence sales were down 7.3%. Donaldson’s Industrial Products segment had a better quarter with sales increasing 3.1% (4.4% currency adjusted)
July 2016
to US$214.0 million. Leading the way were gas turbine systems where revenues were up 9.7%. Sales increased 5.3% in its industrial filtration solutions business unit, but fell 10.3% on its special applications sector. Profitability was higher than the prior year with operating income increasing 11.6% to US$74.9 million and net earnings 14.8% stronger at US$54.8 million. Tod Carpenter, Donaldson’s president and CEO, said the company made good progress in the period with strong sequential improvement in both sales and operating margin on the preceding quarter. “As this period of market-level volatility continues, we remain focused on operational efficiency,” he said. Q www.donaldson.com
With Thermoform Engineered Quality LLC’s (TEQ) move to ESCO Technologies Inc’s new Technical Packaging reporting segment, the Filtration/Fluid Flow reporting segment is now comprised of Crissair Inc, PTI Technologies Inc and VACCO Industries. Second quarter 2016 Filtration sales were up US$0.3 million, with the increase in aerospace sales partially offset by VACCO’s sales decrease due to quarterly timing. “Filtration continues to outperform our expectations primarily driven by the continued upcycle in the global aerospace market, and our solid position on the early stages of deliveries of our new platforms such as the A-350. While VACCO’s Q2 sales were lower than expected due to a few customer related timing items, their year remains on track,” said Vic Richey,
chairman and CEO of ESCO Technologies. Company sales increased US$10 million, or 8%, to US$139 million compared with US$129 million in 2015’s second quarter. Second quarter 2016 orders were US$130 million and year to date 2016 orders were US$273 million, which resulted in an ending backlog of US$328 million at 31 March 2016. “On the acquisition front, I remain hopeful that we can execute on additional transactions over the balance of the year as we continue to review numer ous acquisition candidates. Acquisitions remain a key element to supplement our growth, and we will remain disciplined in our approach to ensure we can generate an attractive return on these investments,” said Richey. Q www.escotechnologies.com
Filtration Industry Analyst
9
ESCO Technologies Inc, USA
Donaldson Co Inc, USA Key Figures (US$ million) Third quarter ended 30.4 2016
2015
Net Sales
571.3
575.6
Cost of Sales
374.7
381.5
Gross Margin
196.6
194.1
Operating Expenses
121.7
127.0
Operating Income
74.9
67.1
Earnings before Income Taxes
72.1
67.8
Net Earnings
54.8
47.8
Key Figures (US$ million) Second quarter ended 31.3 2016
2015
138.9
128.9
Net Sales Of Which: Filtration
49.0
48.8
Cost of Sales
88.1
81.1
Selling, General and Admin Expenses
32.5
32.9
Earnings before Income Taxes Of Which: Filtration
13.6
12.8
9.1
11.0
8.6
7.6
Net Earnings Nine months ended 30.4 2016
2015
1626.5
1760.6
Net Sales Cost of Sales
1081.0
1154.3
Gross Margin
545.5
606.3
Operating Expenses
361.4
396.4
Operating Income
184.1
209.9
Earnings before Income Taxes
174.9
210.5
Net Earnings
131.3
151.7
Six months ended 31.3 2016
2015
Net Sales Of Which: Filtration
271.8
249.5
91.4
89.7
Cost of Sales
168.2
152.8
Selling, General and Admin Expenses
65.8
66.4
Earnings before Income Taxes Of Which: Filtration
26.6
26.4
17.3
18.3
Net Earnings
17.4
17.6
COMMENT COMMENT Donaldson Co Inc has posted net sales of US$571.3 million for its third quarter of fiscal 2016, a decrease of 0.7% on the year earlier. Excluding the negative impact from currency translation, revenues increased 0.2% on the 2015 equivalent. Sales in the Engine Products segment fell 2.9% (2.1% at constant currencies) on the year earlier to US$357.3 million. The bright spot for the division was its aftermarket sales, which were up 4.5% on twelve months earlier. In contrast both off-road and on-road revenues were down significantly, falling 19.6% and 19.0% respectively, while aerospace & defence sales were down 7.3%. Donaldson’s Industrial Products segment had a better quarter with sales increasing 3.1% (4.4% currency adjusted)
July 2016
to US$214.0 million. Leading the way were gas turbine systems where revenues were up 9.7%. Sales increased 5.3% in its industrial filtration solutions business unit, but fell 10.3% on its special applications sector. Profitability was higher than the prior year with operating income increasing 11.6% to US$74.9 million and net earnings 14.8% stronger at US$54.8 million. Tod Carpenter, Donaldson’s president and CEO, said the company made good progress in the period with strong sequential improvement in both sales and operating margin on the preceding quarter. “As this period of market-level volatility continues, we remain focused on operational efficiency,” he said. Q www.donaldson.com
With Thermoform Engineered Quality LLC’s (TEQ) move to ESCO Technologies Inc’s new Technical Packaging reporting segment, the Filtration/Fluid Flow reporting segment is now comprised of Crissair Inc, PTI Technologies Inc and VACCO Industries. Second quarter 2016 Filtration sales were up US$0.3 million, with the increase in aerospace sales partially offset by VACCO’s sales decrease due to quarterly timing. “Filtration continues to outperform our expectations primarily driven by the continued upcycle in the global aerospace market, and our solid position on the early stages of deliveries of our new platforms such as the A-350. While VACCO’s Q2 sales were lower than expected due to a few customer related timing items, their year remains on track,” said Vic Richey,
chairman and CEO of ESCO Technologies. Company sales increased US$10 million, or 8%, to US$139 million compared with US$129 million in 2015’s second quarter. Second quarter 2016 orders were US$130 million and year to date 2016 orders were US$273 million, which resulted in an ending backlog of US$328 million at 31 March 2016. “On the acquisition front, I remain hopeful that we can execute on additional transactions over the balance of the year as we continue to review numer ous acquisition candidates. Acquisitions remain a key element to supplement our growth, and we will remain disciplined in our approach to ensure we can generate an attractive return on these investments,” said Richey. Q www.escotechnologies.com
Filtration Industry Analyst
9