Timken Co. profitable on higher third quarter sales

JACKSON TWP. -- Costs related to pension changes and higher taxes cut into third quarter profits, the Timken Co. reported.

Currency exchanges tied to the strengthening U.S. dollar and a softness in North American markets also factored into third quarter results, Richard G. Kyle, president and chief executive officer, told stock market analysts during a conference call Thursday morning.

The company adjusted its year-end forecast. Revenue now is projected at $3.78 billion for the year, an increase compared with 2018 but lower than previously anticipated. Adjusted earnings per share are expected to range between $4.70 and $4.75. That's also lower than previous projections but will be a record performance.

"While we are taking a cautious view with respect to the fourth quarter, we remain confident in the long-term outlook for the company," Kyle said in the earnings news release. "Our expected record performance in 2019 demonstrates our earnings power in a slowing industrial market environment, the enduring strength of our portfolio, and our ability to navigate and deliver through industrial cycles."

Profits for the quarter ended Sept. 30 were $64.2 million, or 84 cents per share, down 10.3% when compared with the 2018 third quarter profit of $71.6 million, or 91 cents per share. Net sales during the quarter increased 3.7% to $914 million compared with $881.3 million last year.

The third quarter profits decrease compared with last year occurred because of pensions and other retirement plan changes, as well as a higher income tax expense, according to the release.

Through the first nine months, Timken's profits are $248.6 million, or $3.23 per share, a 2.4% increase compared with profits of $242.8 million, or $3.09 per share, last year. Net sales so far this year are $2.89 billion, up 8.3% from $2.67 billion last year.

Timken's two business segments -- mobile industries and process industries -- have nearly identical net sales through the first nine months. Process industries reported higher third quarter sales that the mobile segment.

Improved sales in the process industries segment demonstrates how Timken is shifting its business and moving into a wider variety of business areas, he said.

Sales in process industries through the end of September are $1.445 billion, a 17.6% improvement over 2018. Third quarter sales for the segment were $458.9 million, up 10 percent from $417.1 last year.

Mobile industry sales are $1.448 billion so far this year, slightly ahead of $1.441 billion last year. During the third quarter, the segment's sales slipped 2% to $455.1 million from $464.2 million last year.

Mobile industries has seen fewer shipments in the off-road and heavy truck segments, particularly in the North American market. Declines are offset by gains in rail in Europe and Asia. Process industries has seen gains in the wind and solar energy business sectors, as well as in marine.

Kyle said Timken has benefited from a string of acquisitions made in recent years. The company closed on its previously announced purchase of BEKA Lubrication, based in Germany. Adding BEKA to its Groeneveld and InterLube business units gives Timken "one of the broadest product offerings" in the automated lubrication business segment, Kyle said.

The earnings report had little impact on Timken's stock value. Although the share price opened down, it recovered during the day to close at $49, gaining 4 cents in heavier than usual trading.

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