Eaton Q1 Net Income, Revenue Fall
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Eaton Corp. reported declines in first-quarter net income and revenue as the spread of the novel coronavirus pandemic more then doubled previously expected declines in sales.
For the quarter ended March 31, net income fell to $438 million, or $1.07 per diluted share, compared with $522 million, or $1.23, a year earlier.
Revenue was $4.8 billion, down 10%, compared with $5.3 billion in the first quarter of 2019.
Its largest business segment in terms of sales are electrical products, then, respectively, hydraulics, aerospace, vehicle and eMobility.
Arnold
“At the start of the year, we expected organic sales in the first quarter to be down 3%. The COVID-19 pandemic reduced our sales by an additional 4%, resulting in a 7% reduction in organic sales for the quarter,” Eaton Chairman and CEO Craig Arnold said in a release.
“As we go forward, we will continue to focus on ensuring the safety of our workforce, implementing cost controls to offset the volume declines, and maximizing our free cash flow,” Arnold said.
Eaton, he said, has already made “significant reductions” in salaries and incentive compensation, eliminated merit increases for the year, made “sharp” reductions in all categories of discretionary expenses, and eliminated all nonessential capital spending.
Meanwhile, Eaton’s vehicle segment posted revenue of $598 million, down 26% from the first quarter of 2019. Organic sales were down 20%, partly driven by the impact of COVID-19, which reduced sales by 5%.
Eaton’s commercial vehicle products include transmissions, clutches, and fluid and air conveyance solutions, among others.
“Our revenue in vehicle declined due to the impact of COVID-19 shutdowns, lower Class 8 OEM production, and continued global weakness in light vehicles,” Arnold said. “Operating margins were 13.5%, down 160 basis points from the first quarter of 2019.”
The vehicle segment’s operating profit dropped to $81 million, down 34% compared with $122 million a year earlier.
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In its eMobility segment, revenue was $72 million, down 13% from the first quarter of 2019, driven by a 12% decline in organic sales, of which 4% was due to the impact of COVID-19. Negative currency translation was 1%.
eMobility combines elements of its electrical and vehicle businesses to deliver electric vehicle products to passenger car, commercial vehicle and off-highway OEMs.
The segment’s operating profits were $1 million, driven by lower volumes due to continued weakness in legacy internal combustion engine platforms, and research and development expenditures and manufacturing startup costs for new electric vehicle programs.
The hydraulics segment posted revenue of $507 million, down 16% from the first quarter of 2019 driven by a 14% decline in organic sales, with the impact of COVID-19 driving 3% of the decline.
Revenue declined due to continued weakness in the global mobile equipment market and de-stocking at both OEMs and distributors.
The segment includes pumps, motors and hydraulic power units; controls and sensing products including valves, cylinders and electronic controls; fluid conveyance products including industrial and hydraulic hose, fittings and assemblies, thermoplastic hose and tubing, couplings, connectors and assembly equipment; and industrial drum and disc brakes.
Operating profits were $55 million, down 7% from the first quarter of 2019.
On Jan. 21, Eaton entered into an agreement to sell its hydraulics business to Danfoss A/S, a Danish industrial company, for $3.3 billion in cash.
Eaton’s Hydraulics business had sales of $2.2 billion in 2019. The transaction is subject to customary closing conditions and regulatory approvals and is expected to close by the end of 2020.
Eaton has 97,000 employees, doing business in more than 175 countries.
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