- Email: [email protected]
Donaldson Co Inc, USA
December 2002
Filtration Industry Analyst
Donaldson Co Inc, USA Profile Donaldson Co Inc is a leading worldwide provider of filtration systems and replacement parts. Founded in 1915, the technologydriven company serves customers in the industrial and engine markets including dust collection, power generation, specialty filtration, compressed air purification, off-road equipment, industrial compressors and trucks. Products are manufactured at around 40 plants around the world and through four joint ventures.
COMMENT Donaldson is still riding high on the back of high gas turbine spending, but how long can it last? The company now expects a severe contraction in its gas turbine market, which will cut sales in this area by perhaps US$50 million, or around 20%, during fiscal 2003. The downturn in North American gas turbine sales is likely to be mitigated, to an extent, by an increased market share in Europe, where demand remains strong. Also, plants that were equipped with Donaldson products during the early part of the boom will soon become due for their first filter replacements, and so will provide a reassuring source of future income. 2003 will also be the year that Donaldson integrates Ultrafilter into its operations; the compressed air purification company is expected to play a significant role in its new owner’s future financial performance. ■
Key Figures (US$ million) Donaldson Corp
Year ended 31.7 2002
2001
2000
1999
1998
1126.0
1137.0
1092.3
944.1
940.4
185.6 91.2 334.8 175.7 230.9 107.8
181.8 79.7 345.3 217.3 195.0 117.8
193.2 152.0 328.8 193.1 117.0 108.2
181.2 162.3 267.9 153.5 84.2 95.1
— — — — — —
Gross Profit
349.5
341.7
327.5
275.7
263.3
Operating Income
123.9
112.1
105.6
88.4
86.8
Earnings before Income Taxes
119.0
104.9
100.3
89.2
86.4
86.9
75.5
70.2
62.4
57.1
Net Sales Of Which: Off-Road Transportation Aftermarket Industrial Air Filtration Gas Turbine Special Applications
Net Earnings Contact Details Chairman, President and CEO: Address:
William Van Dyke 1400 West 94th Street Minneapolis MN 55440 USA
Tel: +1 952 887 3131 Fax: +1 952 887 3155 Web: www.donaldson.com
Recent Events • Donaldson completed the acquisition of Ultrafilter International AG in July 2002 (see Filtration Industry Analyst, July and August 2002).
5
COMPANY PROFILE
Analysis Donaldson responded well to a second consecutive difficult year for revenues. Despite the drop-off in sales, the company improved all other lines on its income statement, enhanced inventory and raised overall working capital levels. Much of this success can be attributed to Donaldson’s diversification of filtration products. Record cash flow was used to reduce debt costs, buy back stock and fund acquisitions such as that of Ultrafilter. Donaldson’s net earnings for fiscal 2002 increased by 15% to US$86.9 million on sales that dropped 1% to US$1.1 billion. Decreased sales in the Industrial Products segment, composed of industrial air, gas turbine and special applications, were partially offset by rising sales in the Engine Products segment, comprising off-road equipment, trucks and aftermarket. Notable performances were achieved in sales of gas turbine and truck products, which grew by 18% and 15%, respectively. Sales in industrial air filtration products plummeted 19%, impacted by weakness in industrial capital spending. There are signs of optimism in this area, however; fourth-quarter sales were up by 22% over the third quarter – the first meaningful quarter-over-quarter improvement in two years.
Filtration Industry Analyst
Donaldson Co Inc, USA Profile Donaldson Co Inc is a leading worldwide provider of filtration systems and replacement parts. Founded in 1915, the technologydriven company serves customers in the industrial and engine markets including dust collection, power generation, specialty filtration, compressed air purification, off-road equipment, industrial compressors and trucks. Products are manufactured at around 40 plants around the world and through four joint ventures.
COMMENT Donaldson is still riding high on the back of high gas turbine spending, but how long can it last? The company now expects a severe contraction in its gas turbine market, which will cut sales in this area by perhaps US$50 million, or around 20%, during fiscal 2003. The downturn in North American gas turbine sales is likely to be mitigated, to an extent, by an increased market share in Europe, where demand remains strong. Also, plants that were equipped with Donaldson products during the early part of the boom will soon become due for their first filter replacements, and so will provide a reassuring source of future income. 2003 will also be the year that Donaldson integrates Ultrafilter into its operations; the compressed air purification company is expected to play a significant role in its new owner’s future financial performance. ■
Key Figures (US$ million) Donaldson Corp
Year ended 31.7 2002
2001
2000
1999
1998
1126.0
1137.0
1092.3
944.1
940.4
185.6 91.2 334.8 175.7 230.9 107.8
181.8 79.7 345.3 217.3 195.0 117.8
193.2 152.0 328.8 193.1 117.0 108.2
181.2 162.3 267.9 153.5 84.2 95.1
— — — — — —
Gross Profit
349.5
341.7
327.5
275.7
263.3
Operating Income
123.9
112.1
105.6
88.4
86.8
Earnings before Income Taxes
119.0
104.9
100.3
89.2
86.4
86.9
75.5
70.2
62.4
57.1
Net Sales Of Which: Off-Road Transportation Aftermarket Industrial Air Filtration Gas Turbine Special Applications
Net Earnings Contact Details Chairman, President and CEO: Address:
William Van Dyke 1400 West 94th Street Minneapolis MN 55440 USA
Tel: +1 952 887 3131 Fax: +1 952 887 3155 Web: www.donaldson.com
Recent Events • Donaldson completed the acquisition of Ultrafilter International AG in July 2002 (see Filtration Industry Analyst, July and August 2002).
5
COMPANY PROFILE
Analysis Donaldson responded well to a second consecutive difficult year for revenues. Despite the drop-off in sales, the company improved all other lines on its income statement, enhanced inventory and raised overall working capital levels. Much of this success can be attributed to Donaldson’s diversification of filtration products. Record cash flow was used to reduce debt costs, buy back stock and fund acquisitions such as that of Ultrafilter. Donaldson’s net earnings for fiscal 2002 increased by 15% to US$86.9 million on sales that dropped 1% to US$1.1 billion. Decreased sales in the Industrial Products segment, composed of industrial air, gas turbine and special applications, were partially offset by rising sales in the Engine Products segment, comprising off-road equipment, trucks and aftermarket. Notable performances were achieved in sales of gas turbine and truck products, which grew by 18% and 15%, respectively. Sales in industrial air filtration products plummeted 19%, impacted by weakness in industrial capital spending. There are signs of optimism in this area, however; fourth-quarter sales were up by 22% over the third quarter – the first meaningful quarter-over-quarter improvement in two years.