LAS VEGAS — Modine Manufacturing Co. yesterday updated and brought forward its net new business figure and announced that the company will receive $300 million of expected net new original equipment (OE) business over the next five years. The company also reiterated its fiscal 2006 diluted earnings per share guidance during a presentation at the Gabelli & Company 29th Annual Automotive Aftermarket Symposium in Las Vegas yesterday.
“As a result of our strong technology focus, extensive new product pipeline and expanding global customer partnerships, we expect to generate about $300 million of net new OE business between our current fiscal year 2006 and 2010,” said David Rayburn, Modine president and CEO. “Significant contributors are new diesel engine programs and products, along with additional content per engine, all triggered by more stringent global emission regulations.”
“This new OE business, which represents the net amount after known program losses are deducted, is about 60 percent heavy-duty — including medium and heavy-duty truck, agriculture and construction — with the balance in automotive and light truck, primarily in Europe and Asia,” Rayburn told investors at the conference and those participating by Webcast. “We believe this balanced business split reflects the advantages of our global market diversification strategy.”
He noted that this year’s net new business figure is slightly below the $330 level announced last year primarily because the company launched nearly $90 million of new business in fiscal 2005 alone, coupled with a recent decision to forego renewal of an automotive engine cooling module supply program. “Our global market and customer diversification strategy allows us to be selective with our business opportunities and maintain acceptable profit margins,” Rayburn said.
He noted that the company expects a significant portion of the net new business launches to occur between 2007 and 2010, the years in which more rigid emission regulations take effect in North America and Europe.
“Importantly, our net new business is expected to provide balanced growth for us in North America and Europe,” Rayburn said. “For the first time, though, about 16 percent of our net new business is being generated from our Asian operations. This is the direct result of our acquisition in the summer and fall of 2004 of the Automotive Climate Control division of WiniaMando in Korea and China. The new Asian business confirms the importance of our new geographic footprint and the growth we expect in that region in the years ahead.”
Rayburn also reaffirmed the company’s current fiscal year guidance for diluted earnings per share from continuing operations.
“For fiscal 2006, we continue to expect diluted earnings per share growth from continuing operations in the high single-digit to more likely the low double-digit range compared with $1.79 from continuing operations reported in fiscal 2005, along with higher returns and increasing operating cash flow,” said Rayburn. “Given the $1.01 per share earned in the first half, this would suggest a second half that is roughly comparable.”
“We also expect fiscal 2006 revenues from continuing operations to be in the range of $1.6 billion, compared with $1.34 billion in fiscal 2005,” said Rayburn. “Our top-line organic growth has been augmented by the positive impacts of our acquisitions over the past 15 months.”
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