Honeywell announced second quarter 2009 sales of $7.6 billion versus $9.7 billion in the second quarter of 2008 and earnings of $0.60 per share, compared to $0.96 per share in the second quarter last year. Cash flow from operations was $1,126 million versus $1,042 million in the second quarter of 2008 and free cash flow (cash flow from operations less capital expenditures) was $1,009 million, compared to $853 million in the second quarter of last year.
"Honeywell had good second quarter performance in a tough environment," said Honeywell Chairman and CEO Dave Cote. "We are particularly pleased with our strong free cash flow conversion performance, which reflects our emphasis on effectively managing working capital in these very dynamic market conditions. We also had several important long-term contract wins, including Europe's Air Traffic Modernization program, and we announced a key acquisition in the attractive gas transmission segment to bolster our Process Solutions business. We continue to invest in new products and services that will help strengthen our great positions in good industries and prepare Honeywell for growth when the economy rebounds."
"Economic conditions, however, remain challenging and we are not planning for any recovery in 2009," continued Cote. "Our key process initiatives, such as the Honeywell Operating System, Velocity Product Development(TM), and Functional Transformation, are enabling the aggressive, company-wide repositioning and cost actions that will help Honeywell continue to deliver earnings and free cash flow in this tough environment."
Honeywell expects full-year 2009 sales of approximately $31.5 billion and earnings of approximately $2.85 per share, which is at the low end of the company's previously stated earnings range.
Second Quarter Segment Highlights
- Sales were down 17%, compared with the second quarter of 2008, resulting from lower volumes in Commercial Aerospace, particularly Business Aviation, and the unfavorable impact of divestitures. Excluding the net impact of acquisitions and divestitures, sales were down 14%.
- Segment profit declined 25% and segment margin decreased by 160 bps to 16.7%, due to lower sales volumes partially offset by increased net productivity.
- Honeywell was selected as one of 15 companies to join Eurocontrol and the European Commission in the Single European Sky Air Traffic Management (ATM) Research Joint Undertaking (SESAR JU). The SESAR JU represents the technology pillar of the Single European Sky, an initiative from the European Commission to reform the architecture of the European Air Traffic Management System. The objectives of the initiative are to improve air traffic capacity by three times, improve safety 10 times, reduce ATM costs by 50%, and reduce environmental impact by 10%.
- Honeywell won a contract with the U.S. Marine Corps for Prepositioning and Logistics Support Services, which ensures Marine Corps ships are stocked and available for deployment to combat zones. The 10-year contract is valued at $700 million if all options are exercised.
- Honeywell was selected to provide avionics and its fuel-efficient Auxiliary Power Unit (APU) for Aviation Capital Group's fleet of 68 new Airbus A320 aircraft in a contract valued at more than $40 million. Honeywell's 131-9A APU delivers a 5% fuel savings versus competitors' engines, lowers carbon dioxide emissions, increases power, and produces class-leading reliability and lower maintenance costs.
Automation and Control Solutions
- Sales were down 17%, compared with the second quarter of 2008, resulting from lower volumes and the unfavorable impact of foreign exchange partially offset by the net favorable impact from acquisitions and divestitures.
- Segment profit declined 11%, primarily due to volume declines, while segment margin increased by 70 bps to 11.5%, due to net productivity improvements.
- Process Solutions signed a definitive agreement valued at approximately $400 million to acquire RMG Group, a Germany-based global leader in natural gas measuring and control products, services, and integrated solutions. The acquisition will build Honeywell's presence in natural gas transportation, storage, distribution, and industrial consumption.
- Building Solutions was awarded a $23 million contract from the Royal Canadian Mounted Police to provide a perimeter intrusion detection system for major venues that will be used during the Vancouver 2010 Olympic and Paralympic Winter Games. Honeywell is responsible for the installation, support, and eventual removal of the system, which will help secure approximately 27 kilometers of event perimeter.
- Safety Products, part of Honeywell Life Safety, received a $3 million order from the New York City Fire Department for firefighter turnout gear and a $2.3 million order from the U.S. military for safety butyl gloves.
- Sales were down 41%, compared with the second quarter of 2008, resulting from lower volumes and the negative impact of foreign exchange.
- Segment profit declined 83% and segment margin decreased by 800 bps to 3.2%, due to lower sales volumes partially offset by increased productivity driven by cost savings initiatives.
- Turbo Technologies was awarded contracts estimated at more than $500 million in revenue over the life of these new platforms. The contracts include new technology solutions for downsized gasoline and small diesel passenger vehicle engines and large on-road commercial applications. The engines will be produced for the European, U.S., and Japanese markets beginning in 2011.
- Honeywell launched its new variable geometry turbocharger on the latest Volkswagen Golf TDI, which is now on sale in Europe. This new 1.6L turbocharged engine will also be fitted on several models throughout the Volkswagen group including the Audi A3, Seat Leon, Skoda Octavia, and Seat Altea.
- Sales were down 28%, compared with the second quarter of 2008, primarily resulting from lower volumes at UOP and pass through of raw material price declines at our Resins and Chemicals business.
- Segment profit declined 19%, primarily due to volume declines, while segment margin increased 150 bps to 14.3%, due to the positive impact of cost savings initiatives.
- Honeywell UOP's proprietary biofuel process technology produced jet fuel made from biofeedstocks that performed as well or better than jet fuel produced from petroleum in test flights. The test results were announced by Boeing and its partners at the 2009 Paris Air Show.
- Advanced Fibers and Composites introduced a new Gold Shield ballistic material with improved ability to stop bullets and fragments in military and police armor applications. The business also announced that protective storm curtains for residential homes made with its Spectra fiber are now certified to withstand category five hurricanes.