25.04.2005

Dana profits plunge 72%

Dana Corporation, a major supplier of axles used on telescopic handlers has announced first-quarter 2005 sales up 10 percent to $2.5 billion, compared with the same period last year. Net income however fell 72 percent to $18 million versus $65 million in 2004.

First-quarter 2004 net income included $15 million of one off gains and contributions from discontinued businesses, even allowing for this profits dipped by over 60 percent.

Dana Chairman and CEO Mike Burns said 2005 first-quarter earnings were impacted by several external factors. “The single greatest factor impacting our earnings was roughly $32 million in additional steel costs that we incurred compared to the first quarter of 2004,” he said.

“This is an after-tax number and is net of what we’ve recovered from our customers.

“In addition, this year’s results were affected by a component shortage from a principal supplier, which resulted in reduced shipments of heavy-duty axles in March,” Mr. Burns said. “The component shortage also affected the operating efficiency in our Heavy Vehicle group and led to significantly higher levels of inventory on other related components.

“Finally, the performance of our Automotive Systems Group was impacted by lower production on many of our key light vehicle platforms in North America.

“Against this challenging backdrop, we are stepping up our focus on those items within our control,” Burns continued. “This means accelerating our cost-reduction actions to deliver savings to the bottom line, despite external challenges. We are also working hard to grow our top line. During the quarter, we were awarded net new business that will add approximately $60 million to full-year 2005 sales.”

Steel costs moderating

“In the case of the Automotive Systems Group, the dominant issue has been the effect of higher steel prices,” Burns added. “The good news is that the market price for raw steel has decreased in recent months and demand appears to be moderating. Although the price we pay for forgings and other parts with high steel content has been slow to follow the decrease for a variety of reasons, we remain hopeful that we’ll see less pressure on steel and other material price increases during the balance of the year”.

Commenting on the company’s near-term outlook, Burns said, “Our full-year guidance remains $1.30 to $1.45 per share.”