Aggressive cost-cutting helped Tennant Co. deliver solid fourth-quarter earnings, even as international sales slid.
"Our balanced strategy to aggressively lower Tennant's cost structure, while investing in future growth is paying off," said CEO Chris Killingstad. A mix of lower material costs, more lucrative product mixes and factory cost cuts boosted margins to the best rate since 1999, he added.
The Golden Valley maker of floor and street cleaning machines reported a 22.9 percent increase in earnings to $13.8 million, or 73 cents a share. Excluding a one-time tax benefit of 11 cents per share, earnings would have been 62 cents a share.
Profits rose even as sales fell 2.9 percent to $187.5 million.
Investors welcomed the news as shares jumped 6.6 percent, or $3.08, to $49.82 in Tuesday's trading.
Wall Street analysts had expected earnings of 58 cents a share and sales of $189 million for the quarter.
Killingstad told analysts during a conference call that the quarter's sales grew stronger in North America, but fell 14 percent in Europe, the Middle East and Africa. Sales in Asia dropped 4.9 percent. The company was also negatively affected by currency exchange rates.
For the year, cleaning equipment sales fell 2 percent to $739 million due mainly to declines in Europe and Asia. Earnings were $41.6 million or $2.18 a share, compared with $32.7 million a year earlier.
Killingstad noted that his long-term goal is to reach 12 percent operating margins and for sales growth in the mid- to high-single digits. But he said, "At this time, we are uncertain that global economic conditions, particularly in Europe will support this level of sales growth in 2013."
Tennant's full-year outlook for 2013 now calls for earnings of $2.20 to $2.50 a share and for sales of $750 million to $770 million.