From Akron Beacon Journal
CANTON, OH — Timken Co. executives said the Canton company had a decent 2006, even as profit fell dramatically in the fourth quarter.
And the bearings and specialty steel maker said it is in a buying mood for 2007.
Timken expects this to be a better year than 2006, despite anticipated ongoing weakness from its North American automotive customers.
Because of slowing automotive demand, Timken has set its sights higher: The company told analysts Wednesday it is seeking acquisitions in the aerospace services industry.
Timken on Wednesday reported net income of $222.5 million, or $2.36 a share, on sales of nearly $5 billion for 2006. Sales were up 3.1 percent from $4.8 billion a year ago, but annual earnings fell 14.5 percent compared with 2005.
Fourth quarter sales hit $1.2 billion, up 3 percent from a year ago, but earnings fell to 37 cents per share, down 63.4 percent from $1.01 per share for the fourth quarter in 2005.
Weak demand for its automotive products hurt earnings, the company said.
A week ago Timken announced that its earnings would be less than originally forecast.
Shares on Wednesday rose 29 cents to $29.63. Shares are up 1.5 percent since Jan. 1, and are up 4.2 percent, including reinvested dividends, compared to a year ago.
"Timken benefited from strong industrial markets in 2006, though lower automotive demand constrained our overall performance," Jim Griffith, company president and chief executive officer, said in a statement.
Griffith told analysts that the company may spend hundreds of millions of dollars in the aerospace industries sector to take advantage of growing demand there.
Timken lost $73.7 million in its automotive industry unit for the year as General Motors, Ford and DaimlerChrysler cut back orders as their vehicle sales slumped.
Timken has cut about 2,000 jobs and has been selling off businesses that do not meet its profit goals. Among its sales was Latrobe Steel, which Timken sold in December. It also has sold off its automotive steering business and its European precision steel components business.
Timken expects North American light vehicle production to be 14.9 million units this year, lower than the 15.2 to 15.3 million units consensus from other forecasters, said Jacqueline Dedo, president of the automotive division.
Griffith said the company is focusing to make its automotive division profitable again.
Timken lowered its debt by $160 million for the year, and the company expects its profitability to grow.
Where Timken had to pay $243 million into U.S. pension plans in 2006, it expects it will need to put $80 million into the plans this year, said Glenn Eisenberg, executive vice president for finance and administration.
Timken said it expects to earn $2.50 to $2.70 a share this year, and that it anticipates its automotive unit’s performance will improve in the second half of the year, while its steel group will continue to be highly profitable.
