Johnson Controls 2013 Profit to Top Analyst Estimates

Johnson Controls Inc. (JCI), the largest U.S. auto supplier, said profit this fiscal year will rise 4 percent on a similar gain in sales, exceeding analysts’ estimates, as higher automobile production in the U.S. and China offsets a slump in Europe.

Profit for year ending Sept. 30, 2013 will rise to $2.60 to $2.70 a share on sales of $43.5 billion, Milwaukee-based Johnson Controls said in a statement today. The average estimate of 24 analysts surveyed by Bloomberg was for a profit of $2.59 a share. Analysts had projected annual revenue of $42.2 billion.

The U.S. light-vehicle market, where Johnson Controls got 37 percent of its revenue in fiscal 2012, is heading for a third straight year of gains following the 2009 collapse and industry bailout. However, automakers, including General Motors Co. (GM) and Ford Motor Co. (F), face weaker demand in Europe where sales in that are headed toward a 19-year low.

The auto supplier needs “to see an inflection in macro trends and greater stability in margin performance,” David Leiker, a Milwaukee-based analyst with Robert W. Baird & Co., wrote in an investor note. “The main near-term driver of margin recovery will be improvement in Europe,” wrote Leiker, who rates the shares neutral.

European ‘Improvement’

Johnson Controls received 51 percent of its $42 billion in revenue last year from its auto parts unit, which makes seats, door panels and infotainment systems. The company also makes auto batteries and equipment for managing building climate and security; such products contributed 35 percent of revenue last year. Profit for year ended Sept. 30 was $2.59 a share.

At its analyst day in New York, the company gave near and longer term forecasts for profit at its business units and said it’s putting more emphasis on pricing strategies and manufacturing improvements.

“We used to launch 100 products, now we launch 500,” Chief Executive Officer Stephen Roell said in an interview. “The discipline we’ve had to apply is just much different.”

Profit margins in seating, the company’s largest unit, will be as much as 4.4 percent of sales in 2013, little changed from a year earlier. That will rise to 7 percent to 8 percent through 2017, the company said today.

Margins in automotive electronics and interiors will be about 2 percent in 2013 and as much as 7 percent through 2017. Power solutions, which supplies automotive batteries, will have a profit margin of as much as 14.8 percent next year, expanding 200 basis points a year through 2017.

Johnson Control’s building efficiency unit, which makes equipment for managing climate and security, will have a profit margin of as much as 6.5 percent in 2013 and that will widen by 50 basis points a year through 2017, the company said.

Johnson Controls’ shares rose 1.9 percent to $29.76 at the close in New York and have fallen 4.8 percent this year, following an 18 percent decline in 2011.

To contact the reporter on this story: Mark Clothier in Southfield, Michigan at mclothier@bloomberg.net

To contact the editors responsible for this story: Bob Brennan at rjbrennan@bloomberg.net; Jamie Butters at jbutters@bloomberg.net

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