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Posted: 9:42 p.m. Saturday, Nov. 3, 2012

Companies cut sales, revenue expectations on economic uncertainty

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FILE - In this Aug. 2, 2010 file photo, the Procter & Gamble Co. headquarters building is shown in Cincinnati. Procter & Gamble Co., the world's largest consumer products maker, said Thursday, March 24, 2011, it is teaming up with the world's largest generic drug maker to expand the global reach of over-the-counter brands such as Vicks and Pepto-Bismol. (AP Photo/Al Behrman)

By Chelsey Levingston

Economic uncertainties are prompting businesses to pull back on their sales and earnings projections, and experts now expect the economy to show the same signs of weakness through the first half of 2013.

Despite lower unemployment, growing consumer confidence and higher sales in recent months, some public companies with major local operations have lowered their growth expectations for coming quarters and expressed concerns about the economy.

As the third-quarter earnings season wraps up, U.S. Bank’s asset management arm has seen more announcements that are concerning than exciting, said Jim Russell, chief equity strategist and regional investment director for U.S. Bank.

“I do think we are slowing down. Companies are not confident about what the environment is over the next several months,” Russell said. “Europe continues to be a problematic end market for many companies. A lot of companies are very nervous about the fiscal cliff.”

The fiscal cliff is roughly $600 billion of tax increases and budget cuts set to take effect at the end of this year and early next year. The increases and cuts could cause the nation’s economic growth to stall, according to some experts.

“The first half of 2013 will feel very much like the economy feels right now. Soft, incomplete and frustratingly slow,” Russell said. “Much of this comes down to jobs and job security,” he added.

Caterpillar Inc., Honda Motor Co. and Toshiba are among those revising their future sales expectations down. Caterpillar has lowered its sales estimates twice in recent months.

“The decline in the sales and revenues outlook reflects global economic conditions that are weaker than we had previously expected,” executives of Caterpillar, a Peoria-Ill. maker of heavy equipment, said in a statement with its Oct. 22 third-quarter earnings release. “Cat dealers have lowered order rates well below end-user demand to reduce their inventories. Production across much of the company has been lowered, resulting in temporary shutdowns and layoffs.”

Caterpillar Logistics has a distribution center in Clayton.

Japanese automaker Honda, Ohio’s single largest foreign employer, said last Monday in its quarterly report it now expects lower operating income for its fiscal year ending March 31, 2013. The automaker, a major regional employer with a supplier network throughout the state, said it was lowering income estimates because of the effects on production of a boycott in China, declining sales in Europe and South America, and unfavorable foreign exchange currency effects.

Butler County’s AK Steel Corp. has not issued fourth-quarter guidance, but top company officials said on AK Steel’s recent earnings call the market this year has been worse than expected and they expect to take another loss this quarter.

The United States Steel Corp., of Pittsburgh, Pa., the country’s biggest steelmaker, said Tuesday, Oct. 30, it is feeling the impact of bumpy economies worldwide.

For the fourth quarter, “Our results are expected to reflect continued weakness in the European and emerging market economies, as well as economic uncertainty in North America,” commented John Surma, chairman and CEO of U.S. Steel.

Restaurant chain Frisch’s, headquartered in Cincinnati, said lower food costs helped profitability in its fiscal first-quarter results.

However, “The family dining segment of the restaurant industry continues to struggle with declining customer counts as the U.S. economy continues to languish,” Craig Maier, Frish’s president and chief executive officer said.

Regional accounting firm Clark Schaefer Hackett released in October its annual survey of manufacturing and distribution companies. Of the 187 respondents, 47 percent said the overall health of their business was maintaining, 43 percent said their business was growing and 10 percent said their business was declining. The share of participants that responded their business was declining was more than the survey found the year before.

More survey takers, 81 percent, said they had revenue growth in the year before. The survey also found businesses are most concerned about price pressures, health care costs and shortages of skilled workers.

“As far as performance goes, companies are just seeing moderate growth. The results are similar this year to what they were last year. I think a good term for it is people are cautiously optimistic,” said Dennis McLaughlin, shareholder in charge of the firm’s manufacturing group. “They’re hesitant to commit too much because they’re unsure of what their revenues are going to be like in the future.”

Still, two major area employers — The Kroger Co. and Whirlpool Corp. — revised their earnings projections up in their most recent quarterly reports.

“Our experience through the first half of this year is that the external environment has been a little better than in 2011. We continue to monitor changes in gas prices and inflation, and as the headlines continually remind us, macroeconomic issues will continue to affect consumer sentiment throughout the year,” Mike Schlotman, senior vice president and chief financial officer of Kroger, told investors back on Sept. 7.

Companies discuss financial results

Navistar International Corp.

Sept. 6

Announced a voluntary separation program and a reduction in force of its salaried workforce on lower sales. Actions anticipated to generate $70 to $80 million in annual savings, to contribute to Navistar’s overall goal to reduce costs by $150 to $175 million year-over-year, starting in fiscal year 2013.

“Clearly we are not pleased with these results.” — Lewis Campbell, chairman and interim CEO, third quarter earnings release

Thor Industries Inc.

Sept. 26

“Thor delivered record annual revenue and improving results in the fourth quarter and 2012 fiscal year, driven by a growing RV market and continuing solid bus market. Assuming stable macroeconomic conditions, we anticipate continuing increases in both of our industries through the remainder of calendar 2012 and into 2013, fueled by growth in RV retail sales, right-sized RV dealer inventories and demand for replacement buses.” — Peter Orthwein, chairman and CEO, fiscal fourth quarter earnings release

Caterpillar Inc.

Oct. 22

“We are taking a pragmatic view of 2013—we’re not expecting rapid growth, and we’re not predicting a global recession. At this point, we expect 2013 sales will be similar overall to 2012, but with a slightly weaker first half and a slightly better second half.” — Doug Oberhelman, chairman and CEO, third quarter earnings release

Whirlpool Corp.

Oct. 23

“We have delivered three consecutive quarters of year-over-year operating margin improvement this year driven by the actions we outlined last October. Our ongoing business performance should continue to improve due to our strong cadence of new product innovations, the benefit of our cost savings programs and positive trends in U.S. housing.” — Jeff Fettig, chairman and CEO, third quarter earnings release

Konecranes Plc

Oct. 24

“Macroeconomic uncertainties have increased and there are more signs of a weakening global demand due to the continuing crisis within the Eurozone and slower economic growth in some emerging markets. This is taking its toll on new inquiries.” — Third quarter earnings release

Honda Motor Co.

Oct. 29

Honda revised its fiscal year 2013 forecast for consolidated operating income from the previously announced 620 billion yen to 520 billion yen “factoring in the impact of the recent situation in China, a decline in sales in Europe and South America due to changes in the business environment, and the unfavorable currency effects due to depreciation of local currencies in some emerging countries.” — fiscal second quarter earnings release

Companies discuss financial results

The Kroger Co.

Sept. 7

“Our experience through the first half of this year is that the external environment has been a little better than in 2011. We continue to monitor changes in gas prices and inflation, and as the headlines continually remind us, macroeconomic issues will continue to affect consumer sentiment throughout the year. We are confident in our ability to make tactical adjustments as needed to successfully navigate these factors while continuing to deliver on our Customer 1st strategy.” — Mike Schlotman, senior vice president and CFO, Q2 earnings call

Frisch’s Restaurants Inc.

Oct. 22

“Our first quarter showed mixed results as lower customer counts adversely affected same store sales while our food costs as a percentage of sales dropped 80 basis points from the prior year resulting in improved profitability. The family dining segment of the restaurant industry continues to struggle with declining customer counts as the U.S economy continues to languish.” — Craig Maier, president and CEO, fiscal quarter earnings release

Procter & Gamble

Oct. 25

“We continue to be encouraged by our overall results and the strength of the business…The biggest challenge we face is the significant increase in commodity costs, which has held back operating profit growth.

One question concerns our ability to maintain top line growth momentum in the current economic environment. We’re very well positioned to continue growing in this or any environment. We have a strong multi-year innovation program, which includes recent innovations that we are in the process of rolling out around the world and new innovations that will be coming to market for the first time this year.” — Jon Moeller, CFO, fiscal Q1 earnings call

Cincinnati Financial Corp.

Oct. 25

“We are encouraged by another factor in our growth — the increase in premiums we collect on business policies that are audited to determine accurate premiums based on payrolls or sales. After a period of decrease, the contribution from audit premiums now has risen slightly for each of the past four quarters, indicating that our policyholders’ businesses are on the path to economic recovery.” — Steve Johnston, president and CEO, 3Q earnings release

Honda Motor Co.

Oct. 29

Honda revised its fiscal year 2013 forecast for consolidated operating income from the previously announced 620 billion yen to 520 billion yen “factoring in the impact of the recent situation in China, a decline in sales in Europe and South America due to changes in the business environment, and the unfavorable currency effects due to depreciation of local currencies in some emerging countries.” — fiscal second quarter earnings release

Ford Motor Co.

Oct. 30

“The company’s outlook for North America for full year 2012 remains unchanged. Ford expects significantly higher pre-tax operating profit and margin compared with 2011, as consumers continue to respond to the company’s strong product lineup. Ford also remains committed to maintaining its competitive cost structure as it grows its business in North America.” — third quarter earnings release

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