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The Timken Company, Canton, OH, reported sales of $1.39 billion in the second quarter, up 5% from the same period a year ago. Second quarter net income increased 11% to $74.7 million up from $67.3 million in the second quarter a year ago.
"This quarter's results reflect good progress towards fundamentally improving financial performance," said James W. Griffith, president and CEO. "Strong industrial markets and record Steel Group results contributed to our record second quarter."
For the first half of 2006, sales were $2.7 billion, an increase of 4% from the same period in the prior year, driven by strong industrial markets.
Industrial Group Results
The Industrial Group had second quarter sales of $529.1 million, up 6% from $498.2 million for the same period last year. The company continued to enjoy strong demand across its broad industrial segments, led by increases in the aerospace, industrial distribution, off-highway and rail segments.
For the first half of 2006, Industrial Group sales were $1.03 billion, up 7% from the same period a year ago. While EBIT margins in the first half were lower than the same period a year ago, the company expects Industrial Group margins for the full year to improve over last year's levels due to better pricing, higher volume and improving manufacturing costs.
Automotive Group Results
The Automotive Group's second quarter sales of $426.7 million were comparable to the same period a year ago. The favorable effect of improved pricing was offset by lower demand from North American original equipment manufacturers and the exiting of low-margin business.
The Automotive Group recorded a second quarter loss of $2 million, compared to a loss of $1.2 million for the same period a year ago. Despite improved pricing and mix, EBIT was negatively impacted by higher manufacturing costs due to lower volume and higher energy costs.
For the first half of 2006, Automotive Group sales of $847.7 million were comparable to last year's first six months. The Group recorded a loss of $5.1 million for the first half of 2006, compared to a loss of $6.3 million in the first half of 2005. Results for the first half of 2006 included a $3.5 million increase in the company's accounts receivable reserve for automotive industry credit exposure.
The company expects improved Automotive Group performance in the second half of 2006 through better pricing and the continued favorable shift in business mix. The Automotive Group restructuring program also remains on track to achieve its targeted savings.
Steel Group Results
Steel Group second quarter sales were a record $469.1 million, a 5% increase from $445.3 million in the same period a year ago. The sales were driven by increased pricing, surcharges and higher demand in the service center, aerospace, bearing and energy segments, which were partially offset by lower automotive demand.
For the first six months of 2006, Steel Group sales were $937.3 million, up 3% over the first half of last year.
The company anticipates Steel Group profitability to be down in the second half of 2006, compared to the first six months of the year due to seasonality, but expects to exceed last year's record performance for the full year due to continued strong markets and manufacturing performance.
For more details on the Timken Co.'s 2Q earnings, click here.