Donaldson Co. expected demand for its product would be uneven in its latest quarter — and it was right.
"The market for new equipment was soft, sales of replacement parts were more stable, and growth businesses like 'Process Filtration' were up notably from last year," said Tod Carpenter, chief executive of the Bloomington-based filtration giant.
Total sales for the company's first fiscal quarter, which ended Oct. 31, fell 4% to $673 million, also affected by negative foreign currency exchange rates. Net earnings fell 12% to $65 million, or 51 cents per share. Adjusted for one-time items, including a $900,00 tax benefit last year, earnings were 51 cents a share, still shy of the 53 cents that analysts were expecting.
Despite the bumpy quarter, Carpenter said the company is on track to deliver record profit for the fiscal year.
Increasing gross margins "remains our top operational priority," he told analysts in a conference call Tuesday morning. Expenses rose during the first quarter despite some price increases and lower raw material costs.
Company officials noted that sales were lower across multiple product lines, including engine products, aftermarket replacement filters, gas and turbine systems, disk drive filters and filtration products aimed at industrial factories. The company realized gains in aerospace and defense product sales amid new equipment orders from commercial aerospace and ground defense customers.
The company said it also realized gains from its acquisition of BOFA International, which helped offset overall sales declines with unit sales that grew 1.1% during the quarter.
Carpenter said he expects the rest of fiscal 2020 to remain "uneven," but reiterated Donaldson's prior earnings forecast for fiscal 2020 — adjusted earnings of $2.21 to $2.37 a share.
Donaldson, he said, is bringing new capacity online and optimizing its supply chain.
Shares closed on Tuesday at $53.91, down 2.3%.