• Sales of $5.9 billion increased slightly compared with the prior year • Strong sequential profitability improvement from supply chain disruption recovery • Earnings per share of $0.74 increased 1 percent over the prior year and 48 percent from the prior quarter
ST. LOUIS, May 1, 2012 – Emerson (NYSE: EMR) today announced that net sales for the second quarter ended March 31, 2012, increased 1 percent to $5.9 billion, with mixed results across businesses and geographies. Underlying sales increased 2 percent and currency translation deducted 1 percent, with the U.S. up 3 percent, Asia up 2 percent, and Europe down 4 percent. Restoration of the supply chain disrupted by Thailand flooding, along with robust global oil and gas investment, drove a strong recovery in Process Management compared with the first quarter. Soft economic conditions in Europe and China, and continued weakness in HVAC, telecommunications, and information technology end markets contributed to the overall slow growth. Operating profit margin of 16.5 percent declined 40 basis points from the prior year but expanded 330 basis points from the first quarter, as the recovery in Process Management drove the sequential improvement. Incremental operating profit leverage of 45 percent from the first to the second quarter supports the expectation for record profitability in 2012. Pretax earnings margin declined 40 basis points from the prior year to 13.8 percent, but expanded 340 basis points sequentially with 43 percent incremental pretax earnings leverage. Earnings per share of $0.74 represented an increase of 1 percent compared with the prior year and 48 percent from the first quarter.
“Operations recovered very well from an exceedingly difficult first quarter. The sequential profitability improvement demonstrated our ability to move beyond the challenges we faced last quarter,” said Chairman and Chief Executive Officer David N. Farr. “While trending in the right direction, growth was slow as certain end markets and regions remained under pressure – particularly Europe, China, and Brazil. Underlying growth will accelerate in the second half, but Europe and China will not improve to the degree we expected 90 days ago.”
Business Segment Highlights Process Management sales grew 13 percent, as strong global oil and gas investment, along with solid chemical industry end markets, continued to drive demand. Underlying sales increased 14 percent and currency translation deducted 1 percent, with the U.S. up 24 percent, Asia up 10 percent, and Europe up 4 percent. Segment margin of 18.3 percent increased 40 basis points from the prior year quarter, primarily driven by volume leverage and cost reductions. The strong results were achieved despite increased costs and other lingering effects from the supply chain disruption that are nearing complete resolution. Recovery of delayed sales should occur by the end of the calendar year. Even with the supply chain restoration, backlog continued to increase as underlying orders, which grew 18 percent excluding unfavorable currency of 4 percent, remained very strong. Process Management is poised for an exceptionally strong second half of 2012 and first half of 2013, as backlog conversion and the restored supply chain will drive robust sales growth and operational leverage.
Industrial Automation sales declined 2 percent during the