Standard Motor Products (SMP) has reported its consolidated financial results for the three months ending March 31, 2018.
Consolidated net sales for the first quarter of 2018 were $261.8 million, compared to consolidated net sales of $282.4 million during the comparable quarter in 2017. Earnings from continuing operations for the first quarter of 2018 were $8.6 million or 37 cents per diluted share, compared to $16.4 million or 70 cents per diluted share in the first quarter of 2017.
Eric Sills, Standard Motor Products’ CEO and president, said, “Our overall business experienced declines in sales and margins in the first quarter, compared to the first quarter of 2017, with different dynamics affecting each division. The shortfall is largely due to events that are either timing-related or temporary, as described below.
“Engine Management sales decreased by 5.6 percent in the first quarter, compared to the first quarter of 2017. Excluding our wire and cable business, which is in general decline due to the product life cycle, the Engine Management business was down 2.7 percent. As previously reported, a few of our large customers placed heavy pipeline orders during the early months of 2017, as they looked to expand their offering in both depth and breadth. This was not repeated in 2018 and that accounts for the entire shortfall.
“Overall, our major customers reported a sales increase in Engine Management in the low single digits during the first quarter, in line with our long-term forecasts. As we have said, our customers’ sales are a better indicator of our results than their purchases, which can vary significantly quarter-to-quarter based on ordering patterns.
“Our Engine Management gross margins continue to be impacted by temporary costs associated with the multiple plant moves. On a positive note, in March of this year we were able to fully exit both the Orlando and Nogales facilities, and going forward we will have eliminated these duplicate plant expenses. The receiving locations are doing well and showing continuous improvement, but are still working toward returning to historic run-rate efficiencies, which we expect to achieve by year-end.
“Our Temperature Control sales were down 14 percent compared with the first quarter of 2017. The Temperature Control business in the first quarter is comprised almost entirely of pre-season build orders, which reflect the previous year’s selling season and resulting customer inventory levels. 2016 was a very warm summer, and our customers ended that year with below average inventories. Their first quarter 2017 orders were therefore very strong – up 24 percent from the first quarter of 2016, which makes the comparisons this year quite difficult. Again, these sales are merely positioning our customers for the summer – ultimately, our year is determined by how hot it gets in-season, and time will tell for 2018.
“Temperature Control gross margin reductions were entirely due to our decreasing of production in response to the cooler 2017 season and the resulting under-absorption of overhead in our factories. Now that the closure of Grapevine is complete and our two Chinese joint ventures are performing well, we expect a return to our more recent healthy margin performance.
“In conclusion, while we are not satisfied with our first quarter results, we believe that the causes are relatively short-term in nature, and that as we continue to implement the initiatives we have begun, we anticipate gradual improvement throughout the balance of the year,” he said.
The SMP board of directors has approved payment of a quarterly dividend of 21 cents per share on the common stock outstanding. The dividend will be paid on June 1 to stockholders of record on May 15.
