Donaldson Co. pandemic recovery continues as it reports record results

Donaldson Co. pushed past the issues created by the pandemic to report record results for its first quarter and fiscal year, which ended July 31.

The Bloomington-based maker of commercial and industrial filters says the record pace should continue in the current year, even as it deals with supply issues and inflationary pressures.

The company was able to offset inflationary cost increases on its raw materials by increasing pricing and disciplined cost controls. It expects raw material inflation to continue in the first half of the upcoming year and labor shortages in the Americas to put pressure on its margins.

"We achieved record sales and earnings in fiscal 2021, and I am proud of the way Donaldson employees came together to generate strong results while navigating supply chain complexities and continued pressure from COVID-19," Chief Executive Tod Carpenter said in a news release.

Revenue rose 25.2% to $773.1 million for the quarter and 10.5% to $2.9 billion for the year.

For the quarter, the company earned $84.3 million, compared with $64.2 million in the same quarter last year. For the year, it earned $286.9 million, up from $257 million.

Fourth-quarter earnings per share (EPS) were 66 cents in the fourth quarter, up 32%. For the fiscal year, EPS were $2.24 a share, up 12%.

Donaldson said it expects its record results to continue into fiscal 2022 and says EPS for the year will be in the range of $2.50 to $2.66 a share.

"Our fiscal 2022 forecast implies another year of new records for both sales and profit, and we are acting quickly to address the challenges of today's operating environment," Carpenter said.

Those challenges include more raw material cost increases in the first half of the year. Scott Robinson, Donaldson's chief financial officer, told analysts on the company's earnings call that it expects raw material costs to increase 8 to 10% in the first half of the upcoming year.

"Gross margin will be under substantial pressure in the first half," Robinson said.

Strongest sales results were in its off-road and on-road engine segments, up 51.1% and 32.2% respectively on a constant currency basis for the quarter.

Donaldson has made some off-cycle price increases to offset the rapid raw material cost increases, particularly in steel and urethane-based products, but expects more pricing actions will eventually catch up in the back half of the next fiscal year to offset the gross margin pressure.