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Last updated: January 25, 2013 11:50 pm
Booming aerospace demand amid record worldwide airliner orders helped to push up full-year net income at Honeywell, the diversified industrial group, by 41 per cent to $2.93bn, despite declining US defence spending.
Honeywell, based in New Jersey, also benefited substantially from a 46 per cent fall to $957m in the annual charge for marking its pension assets down to market value. The profits were struck on revenue up 3 per cent to $37.7bn.
Full-year segment profits at the aerospace division grew 13 per cent to $2.28bn, on sales up 5 per cent to $12bn. The growth in segment profits – a pre-tax profit measure that excludes financing and pension costs – was in spite of a 6 per cent decline in fourth-quarter sales in aerospace’s defence and space businesses.
Continuing strong demand in commercial aerospace nevertheless pushed fourth-quarter segment profits in aerospace up 5 per cent to $601m, on sales down 1 per cent to $3.02bn.
Dave Anderson, Honeywell’s chief finance officer, said the company was benefiting from the record backlogs of commercial aircraft orders from major suppliers such as Boeing and Airbus but also from growing spare part demand as aircraft flew more.
“We’re looking forward to continued flight-hour growth for 2013,” Mr Anderson said.
The company forecast growth in 2013 earnings per share (EPS) before pension mark-to-market adjustments of 6 to 11 per cent, to a $4.75 to $4.95 range. EPS for 2012 rose 11 per cent to $4.48 before the pension effect, but rose 41 per cent to $3.69 on an unadjusted basis.
Honeywell – whose chief executive Dave Cote has been one of the corporate leaders most vocal about the need to resolve the US’s public finance problems – has been more sober than many other companies about the prospects for the defence business.
Mike Madsen, head of the company’s defence business, told investors in November that, while he expected the US to avoid severe, across-the-board “sequestration” spending cuts, he still expected spending far lower than foreseen in President Obama’s budget request.
Other military contractors have prepared their 2013 financial forecasts on the basis of the budget request.
In the company’s weakest segment, transport systems, full-year segment profits fell 11 per cent to $432m, on sales down 8 per cent to $3.56bn. The company blamed the decline on falling production in the recession-hit European motor industry.
Mr Anderson said Honeywell was adjusting its European production schedules to cope with the slowdown in demand. But it was also bearing in mind that the business, which specialises in supplying turbochargers, would grow in the long term as more vehicles used turbochargers.
The shares were up 0.13 per cent to $68.33 at the close in New York.
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