Donaldson Co. sales, profits sink amid mining and ag declines

Continued malaise from mining and agricultural customers soured Donaldson Co.'s fourth quarter, sending sales and profits down sharply and prompting a $7.1 million restructuring charge, the company said Tuesday.

The Bloomington manufacturer of filtration systems for trucks, airplanes, power plants and more said some customers continue to pull back on equipment orders.

"Some of our end markets became increasingly challenged and uncertain as the fiscal year progressed," Chief Executive Tod Carpenter told analysts during a conference call Tuesday morning.

For the three months ended July 31, Donaldson's profit fell 23 percent to $56.2 million, or 41 cents a share. Excluding restructuring costs, the company's adjusted profit amounted to 45 cents a share, beating the 42-cent consensus forecast of Wall Street analysts.

Donaldson's stock fell 1.6 percent, or 50 cents per share, to close at $30.81 Tuesday. It is down nearly a third from its 52-week high of $43 a share.

Total fourth-quarter sales fell 9 percent to $610 million, mostly because of a 31 percent drop-off in sales for agriculture, mining and other off-road equipment. Company leaders have been sounding the alarm since May that demand for engine filters softened significantly in mining and agricultural markets.

In addition, sales for aftermarket engine filters fell 15 percent during the quarter.

Carpenter said the fourth-quarter results beat the company's internal forecast.

Stronger than expected filtration sales for heavy trucks, construction equipment and commercial airplanes helped results. Donaldson also cut about $35 million in annual expenses. About $5 million of that helped fourth-quarter results. The company expects the remaining $30 million to help 2016's first half results.

Carpenter also said Donaldson has pulled the plug on a second campus in China, which resulted in sizable layoffs and restructuring charges.

Chief Financial Officer Jim Shaw blamed the pullback on the "ongoing weakness in China's industrial sector."

The restructuring charge for the quarter was $7.1 million, bringing full-year spending on restructuring to $13 million. That's up from $3 million in fiscal 2014.

Donaldson forecast that local currency sales for fiscal 2016 will rise 2 to 6 percent and that full-year earnings will reach $1.56 to $1.75 per share.

The company is still investing for growth, with a new fuel filtration plant in Poland, the recent acquisitions of IFIL USA and Engineered Products Co., and the pending purchase of Industrias Partmo in Colombia.