Bloomington-based Donaldson expects 'uneven' demand for its filters because of trade uncertainty

Uncertainty surrounding trade and other factors has Bloomington-based Donaldson cautious about predicting results for next fiscal year because officials believe demand for its industrial filters will be "uneven."

Sales for this fiscal year, announced on Thursday, set a record, but the industrial-filtration company's forecast for next year's revenue is a range from a 2% decline to a 4% increase.

"It is likely that uncertainty related to global trade and the political environment will keep our customers cautious, and some of our engine-related end markets are nearing the peak of their economic cycle," said CEO Tod Carpenter in a release.

The U.S. and China are in the middle of a trade war that has raised tariffs, at least temporarily, on both sides. Economic indicators on the strength of the U.S. economy are also mixed, with some pointing to a downturn.

Carpenter presented a plan to tackle the uncertain environment and to increase the company's gross margin in the year ahead that leans heavily on its long-term strategy of being a technology-led filtration company that develops innovative new products.

"Our focus this year is navigating uneven demand and improving gross margin," Carpenter told analysts on the company's earnings call.

New-product introductions help boost demand and provide for higher margins than its replacement-parts business. Carpenter said the company will spend $65 million on research and development (R&D) in 2020, a 7% increase over the amount spent last year.

"Material-science capabilities are the biggest opportunity for us," Carpenter said.

Material-science advances from that center are expected to make a long-term difference throughout Donaldson's product portfolio.

Donaldson's profits for the fourth quarter were $58 million, down from $102.4 million in the same period a year ago. Adjusted for one-time events, earnings were 61 cents a share, a penny above analysts' expectations and a 5.2% increase over last year.

Sales were up slightly to $726.9 million, beating expectations.

For the year, the company hit records for both profits and revenue. Earnings were up 48.2% to $267.2 million. Sales were up 4% to $2.85 billion.