2009 income dips 40% for Baldor; sales down 22%

Don’t expect any sentimental fondness for 2009 among officials at Fort Smith-based Baldor Electric Co.

The global manufacturing company reported Thursday that its 2009 total sales and net income were down 22% and 40%, respectively, compared to 2008.

Net income reached $59.796 million, compared to $99.423 million in 2008. Total sales in 2009 were $1.524 billion, compared to $1.954 billion in 2008. The company noted that 2008 included an extra week of sales.

Baldor Chairman and CEO John McFarland noted in the earnings report that the 2010 outlook is a little brighter.

“Incoming order rates have begun to show improvement. As a result, we expect first quarter 2010 sales to be in a range of $380 – $400 million with continued margin improvement on a year-over-year basis. For the full year of 2010, we expect a slight sales increase,” McFarland advised.

In a Q&A portion of the earnings statement, the company provided more perspective: ”2009 was a very difficult year. We believe that during the year we made many decisions that will benefit us in the long-term. During 2009, we invested in both new products and new customers, improved productivity in our plants, and reduced costs by $115 million on an annual basis. As a result of these investments and an improving incoming order rate, we expect an increase in sales and earnings in 2010.”

Jon Braatz, an analyst with Kansas City Capital Associations, said in a November 2009 note to investors that the company would likely see 2010 sales gains compared to a weak 2009.

“Projecting fiscal 2010 EPS (earnings per share) is difficult at best given the current economic environment. Assuming only a 2-4% GDP growth next year, we think (Baldor’s) top line growth will be modest. We are expecting down to flattish sales in the first quarter but sales gains in the final three quarters albeit modest. For fiscal 2010, revenue is forecast to rise 4.6% to $1.60 billion,” Braatz wrote.

Recent stock market trends indicate pessimism about 2010 manufacturing companies and Baldor has not escaped the contrarian views. Baldor shares (NYSE: BEZ) dropped in Thursday’s trading to $25.28, down $1.55, or more than 5.7%. The share price has been on an overall downward trend since closing at $30.03 on Jan. 5. During the past 52 weeks, the share price has ranged from a $30.82 high to a $10.21 low.

However, Baldor’s 2009 per share earnings of $1.28 bested analyst estimates of 97 cents.

Baldor, a maker, designer and marketer of industrial electric motors, motor drives, power transmissions and generators, posted sales in 2009 of $1.52 billion. The company employs between 7,000 and 7.500 in 26 plants in five countries and sales offices serving more than 80 countries. About 2,000 are employed in the Fort Smith area.

Other key notes mentioned in the Baldor earnings report include:
• Cash flow from operations in 2009 was $99.122 million, down 53.7% from the $214.105 million in 2008.

• Sales to domestic OEMs (original equipment manufacturers) declined 30% while sales to domestic distributors declined 14% for the quarter as compared to fourth quarter 2008. Customer inventories appear to be lean, and Baldor officials reported no signs of restocking.

• Generator sales grew by 48% for the quarter as compared to fourth quarter 2008 and 16% for the year as compared to 2008. The company expects generator sales to continue to grow at a double-digit rate during 2010.

• Sales of Super-E(R) motors declined 13% and overall motor sales declined 30% during the quarter as compared to fourth quarter 2008. Super-E motors represented 15% of motor sales during the quarter, and the company expects them to comprise approximately 50% of our total motor sales in 2011 once the 2007 Energy Independence and Security Act takes effect in December 2010. The company anticipates that the federal energy legislation will add $120 million to $150 million of motor sales in 2011.

• International sales of $61 million declined 29% compared to fourth quarter 2008. However, the incoming order rate improved during the fourth quarter, and that trend has continued into January 2010. Incoming orders exceeded shipments in almost all regions, and are particularly strong in China.

• The company reports it is beginning to see increased costs for steel, copper and cast iron, the largest raw material purchases. If the trend continues, the company said it may may push a sales price increase in the second quarter.

• The company’s goal is to reduce debt by a minimum of $75 million during 2010. Since taking on the $1.55 billion debt three years ago, Baldor has repaid $347 million.